A booming economy and an already record-breaking NPE—what could possibly go wrong?

April 20, 2018

economic growth symbolic imageSince its inception in 1946, NPE has unfolded under all manner of economic cycles—the good, the bad and the meh. During a webinar on the state of the plastics industry near the end of last year, Perc Pineda, Chief Economist for the Plastics Industry Association (PLASTICS; Washington, DC), forecast a robust 2018 for the economy at large and the plastics industry specifically. Improving economic conditions and strong fundamentals domestically will result in a ninth straight year of expansion for the plastics industry, said Pineda. “I don’t see any headwinds in the next 12 months,” he added. In a rare instance of what has been called “global synchronous growth,” the international outlook appeared equally promising for 2018. Those forecasts came before President Trump made good on his campaign promise to get tough on trade, slapping tariffs on imported steel and aluminum and engaging in a (thus far, rhetorical) trade tiff with China. In light of these developments, and the NAFTA negotiations that seem to be stuck in neutral, I wondered if Pineda had any second thoughts. Not in the least, he told PlasticsToday. I also posed the question to folks in the industry. While all expressed some concerns, the consensus is that, ultimately, cooler heads will prevail and the economy, along with the plastics industry, will keep humming along.

“The latest economic data continue to reflect more visible signs of U.S. economic growth momentum,” Pineda recently told PlasticsToday. “The latest report from the Bureau of Economic Analysis shows that in 2017, corporate spending increased $91.2 billion, in contrast to a decrease of $44 billion in 2016. Personal income increased $67.3 billion in February. The basis for investment spending on the business side and consumer spending on the household side are both strong,” said Pineda.

While the steel and aluminum tariffs have the potential to affect plastics machinery and molds, numerous exemptions have mitigated their impact. As for China, “long-standing concerns regarding intellectual property rights and China’s currency have put U.S. exports at a disadvantage, and should certainly be addressed,” said Pineda. How the trade spat will impact the U.S. plastics industry, however, is uncertain, he added.

“Considering that markets are dynamic and that demand and supply functions change, in addition to the fact that the long-run relationship between U.S. retail sales and U.S. plastics shipments remains stable, the underlying growth trend in the plastics industry this year remains positive,” said Pineda. “Any pushback the industry will experience because of tariffs remains to be seen, but will likely show up in the apparent consumption of plastics, which PLASTICS annually quantifies in its Global Trends Report.” The most recent report, which looks at 2016, can be downloaded from the PLASTICS website.

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