Deeper numbers show plastics industry steady

Nov 12, 2015, 10:28 ET from Plastics News

DETROIT, Nov. 12, 2015 /PRNewswire/ -- The Plastics News Business Monitor Index for Q3 2015 is 98.7 (a value less than 100.0 indicates a decrease in business levels when compared with the previous quarter). The latest index value is a 13.5-point decrease from the Q2 value of 112.2. Each quarter, Plastics News Research surveys North American processors, and this Index is calculated from the responses.

At first glance, it appears that overall business levels for plastics processors declined modestly in the latest quarter. However, a closer inspection of the data reveals that business conditions are not as bad as the headline number suggests. As the table indicates, processors reported growth in the important categories of new orders, production, and the number of employees. The gains in these activities were mitigated by sharp declines in export orders, backlogs, and prices received.

Taking a closer look at the categories that comprise our Index, the New Orders component posted a respectable 114.0 in the latest quarter. This is well into positive territory, and this maintained the trend of rising growth that has prevailed for the past four quarters.

 

Plastics News Business Monitor Index

THIRD QUARTER 2015 INDEX: 98.7

Sub-Indices

Q3

Q2

Change

Direction

Rate

Trend

New Orders

114.0

132.1

-18.1

Increasing

Slower

4 qtrs.

Export Orders

91.4

100.5

-9.1

Decreasing

From Incr.

1

Production

111.2

129.5

-18.3

Increasing

Slower

4

Backlog

85.1

98.3

-23.2

Decreasing

Faster

4

Employees

106.7

115.9

-9.2

Increasing

Slower

4

Prices Received

83.9

97.2

-13.3

Decreasing

Faster

4

Future Expectations

140.6

151.9

-11.3

Rising

Slower

4

Capital Spending

114.4

126.8

-12.4

Rising

Slower

4

PN Business Monitor Index

98.7

112.2

-13.5

Decreasing

From Incr.

1

 

The Production component is also positive at 111.2, so work levels continue to rise steadily. The Employment component is 106.7, which means that there was another increase in processors' payrolls during the quarter.

Due to the strong rise in the value of the dollar this year, there is little doubt that export demand is declining. And the slower growth in total orders combined with steady production levels and rising payrolls explains the drop in backlogs last quarter. So the data clearly indicate that the upward momentum in the plastics industry waned in the third quarter.

But the data also indicate that market demand for plastics products did not actually decline. An accurate description would be that market demand was mostly steady.

This analysis is based on an interpretation of the sharp drop in the Prices Received component. A decline in the prices received category is often an indication of a drop in market demand. But this time the downtrend in prices is the result of the sharp decline in resins prices. This actually has a positive effect on market demand for plastics products in the long run.

This interpretation is corroborated by the recent trend in the monthly data that the Federal Reserve Board compiles on the total US production of plastics products. In Q3, the Fed's industrial production index for plastics products posted a gain of less than 2% when compared with the second quarter, and it was up less than 4% from the third quarter of a year ago. These figures indicate that the pace of growth in the plastics industry is slowing, but it is still positive.

So conditions for plastics processors were steady--not down--in the third quarter when compared with the second quarter. But clearly the longer-term trend in the growth rate for the industry has been gradually decelerating since the end of 2014.

Plastics News Research, Copyright © 2015 Crain Communications Inc.

The PN Business Monitor is a quarterly survey conducted by Plastics News Research – a separate unit of the publication that conducts B2B market research and analysis. We report on the state of business within the plastics industry every quarter.  We keep an open dialogue with a representative cross-section of plastics processors representing the North American marketplace to provide commercial and industrial businesses with the latest trends and help company managers forecast quarter to quarter. 

For further details or to arrange an interview with one of our analysts please contact Kelley Trost by phone 313.446.6761 or e-mail ktrost@crain.com.  Information may also be obtained through www.plasticsnews.com.

A limited license to use or reprint information from this news release is granted to you provided acknowledgment for the same is given to Plastics News Research (Detroit, Mich.). We would also appreciate the courtesy of receiving a copy of the article or publication in which we appear.    

SOURCE Plastics News



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