New economic data released by the federal government provides insight into the state of the plastics industry. PLASTICS is here to interpret signals in the noise.
By Perc Pineda
Chief Economist
New economic data released by the federal government provides insight into the state of the plastics industry. PLASTICS is here to interpret signals in the noise.
What’s new?
According to the Federal Reserve, U.S. plastics materials and resin production increased by 19.3% from March to April, following a 12.2% monthly increase in March. February’s adverse weather caused resin production to fall by 25% from the previous month, crippling supply.
The Bureau of Labor Statistics’ producer price index for plastics material and resin increased 0.5% from April to May[i], the lowest increase since resin prices began to increase last year. March and April saw the index increase 9.4% and 6.2% in April and May, respectively. On a year-over-year basis, the resin producer price index is still higher by double-digits, compared to early 2020.
How does production compare to past years?
While resin production decreased 4.2% from April to May, it was 6.5% higher than a year earlier. Long-term data shows resin production fluctuating monthly regardless of the business cycle. From the 2008-2009 recession to January last year, monthly resin production fluctuated from a -7.3% low to a 12.8% high, averaging a monthly growth rate of 0.1%. This May, capacity utilization in resin manufacturing was 85.3%—a significant improvement from 66.8% in February.
What does this all mean?
The last three years of data show resin production on an upward trend. Barring unforeseen events, a resumption of plastics material and resin to pre-pandemic capacity should narrow and eventually close the resin demand-supply gap. However, expect residual effects of the winter storm to linger as “catch-up” resin finds its way to customers. With the easing of supply, upward pressure on prices should ease.
[i] Eleven monthly Producer Price Indices for the plastics industry can be downloaded from PLASTICS website at https://www.plasticsindustry.org/data-analysis-reports/.
