Perc Pineda, PhD
Chief Economist, PLASTICS
Those in the plastics industry and healthcare sector understand the crucial role plastic plays in saving lives. Plastics has been a trusted material for many years, relied upon by pharmaceutical companies, medical equipment manufacturers, laboratories and research facilities, and healthcare professionals.
Production trends
According to PLASTICS’ annual Size and Impact Report, an estimated 8.2% of plastics and plastic products, amounting to about $30.4 billion, were used in healthcare services in 2022. It is not surprising that in April 2021, the Industrial Production Index for medical equipment and supplies rose 25.5% year-over-year as the world battled the COVID-19 pandemic. This increase continued to 27.6% in May 2021, before gradually returning to its long-run growth rate.
U.S. domestic production of medical equipment and supplies is complemented by international trade. When accounting for U.S. trade of these goods with other countries, the trade balance—the difference between exports and imports—decreased last year to $10.9 billion, following trade deficits of $13.3 billion in 2022. At the height of the COVID-19 pandemic, the trade deficit widened from $10.2 billion in 2020 to $17.8 billion in 2021. This was driven by growth in imports from $44.9 billion in 2020 to $57.1 billion in 2021.
In December 2023, production of medical equipment and supplies rose by 1.3%. This year began with a 0.8% decline in medical equipment and supplies production in January from the previous month. There was a brief recovery with a 1.7% increase in February, but production declined again by 0.8% in March, 0.4% in April, 2.1% in May, and 1.1% in June. Overall, production decreased by 1.8% in the first quarter and 2.1% in the second quarter.
Production outlook
According to the latest Plastics Quarterly Forecast*, it is projected that medical equipment and supplies manufacturing will increase by 0.6% this year. Plastics companies serving the healthcare sector may have noticed a slowdown in business activity, raising concerns about whether the recent declines signify a trend.
Judging from macroeconomic data, Personal Consumption Expenditures (PCE) on healthcare remained stable in the long run. Spending on healthcare, a metric of demand, has ranged between 16.0% and 17.0% of PCE from 2007 to 2023. In 2023, the PCE on healthcare was $2.5 trillion. If this trend continues this year and next, it can be expected that the production of medical equipment and supplies will align with the long-run trend and could grow by 2.0% next year.
*The Plastics Quarterly Forecast is an exclusive report for PLASTICS members. For membership information, please contact [email protected].
