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Is a U.S. manufacturing renaissance on the horizon?

The plastics industry is doing relatively well in spite of economic concerns and weakness in some sectors supplied by plastics processors. That's the analysis given by Michael Taylor, Senior Director of Internal Affairs & Trade for the Society of the Plastics Industry, speaking at the 'Business of Plastics @ ANTEC' conference.

Clare Goldsberry

April 29, 2013

4 Min Read
Is a U.S. manufacturing renaissance on the horizon?

Taylor commented that according to the recent Beige Book statistics, "Expansion remains moderate and sequestration hasn't had much impact." Manufacturing is doing better than the economy as a whole, up about 3-4% for 2013 so far. "Not quite a boom but a significant increase. The housing market is strengthening with new home construction and gains in multi-family housing. This will continue to be a bright spot in the economic recovery," Taylor projected.

While U.S. industrial output rose in March, and offset some weaknesses in subsectors, overall factory production slipped slightly. Total industrial production and manufacturing rose 5% on an annualized basis. Taylor pointed to the National Association of Manufacturers and IndustryWeek survey that showed sales up 2.3%.

True manufacturing renaissance on hold
Taylor addressed the uncertainty in the federal budget process, commenting, "I don't think there is a budget process. That has become dysfunctional which is leading to a lot of uncertainty. The markets don't like it. And the European crisis doesn't seem to go away."

The trend is for companies to hedge a bit, noted Taylor. "Almost totally, they'll say business is doing well, but at the same time they're hedging - no new hires, no new machinery, no investment," he said. "There's significant uncertainty which translates into risk and they'll try to mitigate that, which is why the recovery has starts and stops. There's no outlook that political uncertainty will become more certain."

It's that uncertainty that is holding back a true manufacturing renaissance, Taylor commented. "If we got rid of the uncertainty we could do better. However, there is modest growth overall despite higher taxes and fiscal uncertainty," he said.

The employment outlook for some manufacturing sectors is good. Employment gains for Fabricated Metal Products in 2012 totaled 176,600, and Plastics and Rubber (but more plastic than rubber) totaled 44,900 new hires.

"We haven't quite gotten back to pre-recession levels, but I'm optimistic," he stated.  "For our industry it will be 2014 before we're back to pre-recession levels."

Global outlook
Globally, the "Euro zone is still stuck in recession with some weakness even in Germany," Taylor noted. "China's manufacturing rebounded and we're seeing some movement in Chinese manufacturing to Southeast Asia. Labor costs in China are going up quite rapidly and I think this trend of moving their low-end manufacturing to low-cost countries in Southeast Asia will continue."

As for the U.S. plastics industry as a whole, Taylor says that as the third largest manufacturing sector, "We get listened to on Capitol Hill." Compared to manufacturing overall, the plastics industry has done well - up 0.1% (1980-2011) while manufacturing generally was down 1.0% during that same period.

Plastic product production is fairly flat, but trending in the "right direction" according to Taylor's information. "Although not as dramatic, I'm optimistic about the sector as a whole."

That said, capacity utilization is just under 75% (March 2013), but Taylor is also "optimistic that this will go up once some of the economic externalities and uncertainties" become settled.

Taylor is gung-ho over free trade agreements and the Miscellaneous Tariff Bill.  The Miscellaneous Tariff Bill requests the temporary reduction or suspension of duties on certain U.S. imports such as intermediate products or materials that are not made domestically or where there is no domestic opposition. Such reduction or suspension reduces costs for U.S. businesses and ultimately increases the competitiveness of their products.

"We don't want to put additional burdens on U.S. manufacturers," he said of the Miscellaneous Tariff Bill, which he noted is bi-partisan bill that would be in effect for three years and limited to a value of $500,000.

Taylor also believes that the Trans-Pacific Partnership (U.S., Canada and Mexico) is good for trade. In 2011, the plastics industry has a trade surplus with TPP countries of more than $3.4 billion. Mexico is the U.S.'s number one export market with $12.5 billion in exports. Canada is number two, with $12.1 billion. For Molds, Mexico is also our number one export trade partner with $263.2 million in molds shipped there in 2012.

The Transatlantic Trade and Investment Partnership (the U.S. and European Union) represents 50% of the world's GDP and 41% of GDP in purchasing power, and is also beneficial to the plastics industry.

Flexible labor as a differentiator
Generally, Taylor believes there are good opportunities for those in the plastics industry. "Flexibility in the labor force is key to our success," he said. "That's a huge competitive advantage and our labor productivity is high. Maintaining our intellectual property is also key. We want the highest standards possible. Identify the niche where you have a competitive edge."

Noting that 'nearshoring' is a positive trend, Taylor commented, "There's a lot of work coming back to Mexico, particularly in the automotive sector which helps U.S. companies overall and that's positive," he said. "I think these trends will definitely continue."

About the Author(s)

Clare Goldsberry

Until she retired in September 2021, Clare Goldsberry reported on the plastics industry for more than 30 years. In addition to the 10,000+ articles she has written, by her own estimation, she is the author of several books, including The Business of Injection Molding: How to succeed as a custom molder and Purchasing Injection Molds: A buyers guide. Goldsberry is a member of the Plastics Pioneers Association. She reflected on her long career in "Time to Say Good-Bye."

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