August’s Index—48.7

Custom processors grow for fourth month out of six.

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With a reading of 48.7, Gardner’s Plastics Processors’ Business Index contracted for the fourth time in five months. However, the rate of contraction in August was somewhat slower than in the previous two months. (An index value below 50 indicates contraction; values above 50 indicate expansion.)

Custom plastics processors, which we track separately, grew for the fourth month out of six. On the other hand, captive plants at OEMs in automotive, medical, and aerospace lagged in August. Resin suppliers—who also compound, of course—have grown every month but one since December 2015. Their index has been above 54 in most months.

After two months of contraction, the new orders index improved significantly and grew in August. New orders generally have grown in 2016, but there does appear to be a decelerating growth trend in the index. 

The production index also grew in August after two months of contraction. Like the new orders index, the production index generally has grown, but at a decelerating rate in 2016. The deceleration in production seems to be a little slower than for new orders. Therefore, the backlog index was lower in the last three months than it was in February to May. However, in 2016 the backlog index generally was still above its level in 2015. 

Employment contracted at a minimal rate for the third consecutive month. Exports continued to contract in August, although the index has been on an upward trend since November 2015. Supplier deliveries have lengthened since February.

Material prices increased for the fifth month in a row. The rate of increase has been quite strong, faster than at any time since November 2014. Since that same month, prices received have decreased every month but one. However, since June 2015, prices received have decreased at a slower and slower rate. Future business expectations improved considerably from last month.

The index was at its second highest level since April 2015. Future capital-spending plans for the next 12 months were above average for the third time in five months. In six of the last seven months, future spending plans were higher than they were a year ago. As a result, the annual rate of change in capital-spending plans grew at an accelerating rate for the third month in a row. This was a very positive sign for future capital spending. 

ABOUT THE AUTHOR

Steven Kline Jr. is part of the fourth-generation ownership team of Cincinnati-based Gardner Business Media, which is the publisher of Plastics Technology. He is currently the company’s director of market intelligence. Contact: (513) 527-8800; email: skline2@gardnerweb.com; blog: gardnerweb.com/economics/blog