Published 11/23/2023

Contraction in Processing Slows in October

The Gardner Business Index for plastics processing activity jumped a bit in October, though it still contracted as it has since July 2022.

economics

Jan Schafer

Director of Market Research

For example, employment ended a three-month stretch of contracting at accelerated rates with a slight reprieve in October. Backlog experienced the same, though it has been contracting since July 2022 and on a recently accelerated basis since May. The fact that components, production and new orders are flat makes it more likely that slowed contraction in backlog is more variability than real.

Supplier deliveries, which crept back to flat in September, essentially maintained that level in October. Overall business activity for custom plastics processing dodged a recent low with an uptick in contraction during October.

Numbers in Perspective

The robust 4.9% seasonally adjusted annualized GDP growth in the third quarter showcases the U.S. economy’s resilience, but it’s essential to remember that the GDP lags current economic conditions. While celebrating growth until September, businesses facing prolonged high borrowing costs must look to the future.

By Perc Pineda

The Industrial Production Index for plastic products manufacturing displayed potential with two consecutive monthly increases, rising by 0.9% in August and almost 1% in September. However, these upswings may not establish a lasting trend, as we observed a similar pattern in May and June, followed by a 2.2% decline in July.

Looking forward, consumer engagement becomes vital for the economy. Personal consumption expenditure saw a solid 4% annualized growth in the third quarter, with durable and nondurable goods consumption increasing by 7.6% and 3.3%, respectively. Potential hindrances to consumer spending include a sustained high-interest environment and weaker labor markets. In its Nov. 1, 2023 meeting, the Federal Reserve opted to maintain the Fed funds rate within the 5.25% to 5.50% interest rate range.

During the Federal Open Market Committee’s Nov. 1 meeting, Jerome Powell, the Federal Reserve chairman, emphasized not when the Fed would cut interest rates but how long monetary policy would remain restrictive. Based on economic fundamentals, it suggests the Fed will not reduce rates soon. Recent data highlights robust third-quarter economic growth, moderated job gains, strong employment and persistent high inflation.

The third quarter is now in the past. Did the U.S. household sector face challenges in October? Both the Conference Board’s Consumer Confidence Index and the University of Michigan consumer sentiment recorded their third consecutive monthly decline in October, despite sustained high household spending. Consumer behavior undoubtedly ripples into plastics production.

ABOUT THE AUTHOR: Perc Pineda, Ph.D., chief economist of the Plastics Industry Association (PLASTICS), is an industry thought leader and PLASTICS’ primary expert and spokesperson on the U.S. and global economy, industry research, statistics, trends and forecasts. He produces PLASTICS’ two annual flagship publications — Size & Impact and Global Trends — and trademarked the Global Plastics Ranking. Read his views and insights on the economy and the plastics industry at plasticsindustry.org.