Output of Plastics Products Was Strong in Q3

Despite all of the economic turmoil and uncertainty caused by the shutdown of the federal government in recent weeks , the U.S. plastics industry posted another strong performance in the third quarter. The total U.S. output of plastics products expanded by almost 6 percent in the third quarter when compared to the same quarter of a year ago. This marked the sixth consecutive quarter in which output levels expanded by a rate of at least 6 percent.

This compares quite favorably to the overall industrial sector in the U.S., which is presently expanding by a moderate rate of 2 percent. Our latest forecast calls for annual growth in the plastics industry of 6 percent in 2013 followed by a gain of 5 percent in 2014.

However,  while the output of plastics processors has been expanding at a robust pace for the past year and a half, the capacity utilization rate for the industry has hardly budged. The data show that the rate of capacity utilization in the plastics industry has flatlined at the 75-percent level. This is well below the utilization rate of nearly 85 percent that prevailed prior to the recession in 2009.

It is hard to imagine how the production levels could continue to grow at a solid pace without increasing the rate of capacity utilization in the industry. Rising utilization rates eventually drive demand for new molds and tooling and also new equipment.

This is one of the most glaring deficiencies in the current recovery. The output of products that are intended to have short lifespans are growing at a reasonable rate, but the growth rate in the output of products and structures that are intended to last for several years remains sluggish. Investment in new plants and equipment has been lackluster for the past four or five years. This must change if we are ever going to return to healthy growth in the economy.