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Plastics Industry Continues to Outperform Manufacturing as a Whole
Plastics Industry Association Chief Economist Perc Pineda is cautiously optimistic for 2025.
Norbert Sparrow
September 20, 2024
3 Min Read
Image courtesy of Plastics Industry Association
Historically, the plastics industry has outperformed the overall US manufacturing sector in terms of employment, shipments, value added, and productivity growth, and that won’t change for the foreseeable future. In fact, if the Federal Reserve continues to lower interest rates this year and next, which seems probable, it could revive the housing sector, and that would greatly benefit the plastics industry. Perc Pineda, PhD, chief economist at the Plastics Industry Association (PLASTICS), shared these and other industry insights during a press briefing yesterday on the release of the association’s 2024 Size & Impact Report.
Growing belief in a soft landing
Speaking the day after the Federal Reserve cut interest rates by 50 basis points, Pineda deemed the move “appropriate,” since anything less would have had no perceptible economic impact. The cut signals “a less robust but still expanding economic outlook,” Pineda said, and aligns with the “Fed’s goal of achieving a soft landing. The economy has continued to expand in a high-interest environment, except for the housing sector.” There is a growing belief in a soft landing, which should renew vibrancy in the plastics industry, despite more moderate economic growth projected for 2025, he added. “The US economy is projected to grow by 2.6% this year and 1.9% in 2025. We could see another rate cut this year and if that continues into 2025, it could start reversing the slump in the housing sector,” said Pineda. “That will have positive implications for the plastics industry, since construction is a key market.”
Construction accounts for almost 9% of final consumption of plastic products, as seen in the chart below.
Graphic courtesy of Plastics Industry Association
More notable insights from the briefing
Further contraction in plastics industry employment is expected in 2024, but at a smaller rate than previously projected. “We are penciling in a 0.2% decline this year and an increase of 0.9% for 2025,” said Pineda.
Real plastics shipments could be up by 1.3% year-on-year in 2024, driven by an increase in plastic materials and resins on top of stable plastics monthly demand. The current projection for 2024 is actually an upward revision from the previously forecast 1%, noted Pineda. In 2023, the plastics industry accounted for $519.1 billion in total shipments. When suppliers are included, the total value is $658.2 billion. For 2025, the shipments forecast has been downgraded from 2.2% to 1.6% to account for a weakening labor market, reflecting cautious optimism, said Pineda.
Capital expenditures (CapEx) declined 12.1% from 2022 to 2023, caused mainly by high interest rates, according to Pineda. “Over 10 years, however, CapEx in the plastics industry increased 2.6%, and 1.6% over five years. Despite weakness in the manufacturing sector and high interest rates, CapEx is not decreasing significantly in the plastics industry,” said Pineda.
Capital expenditures in the plastics manufacturing sector have increased 2.6% over the past 10 years. Chart courtesy of the Plastics Industry Association.
The Biden administration has shifted its position and now favors plastics production cuts as a means to reduce plastic pollution, noted Pineda. He argued that data show the industry has not flooded the market with plastics. “We have been producing responsibly and sustainably just to meet market demand. From 1997 to 2023, the compound growth of plastics shipments was zero,” said Pineda. This confirms that the plastics industry has not been oversupplying the market, he stressed. “In fact, we had projected a 3% decline in plastics shipments in 2023 — as it turned out, the decrease was only 2%, less than forecast.” The bottom line, according to Pineda, is that “industry has been very responsible in producing plastics and plastic products that efficiently meet market demand, and we, as an industry, have the data to support that claim.”
The 53-page 2024 Size & Impact Report is now available for download on the PLASTICS website.
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