Plastics Processing Index Remains Virtually Unchanged

The Gardner Business Index (GBI) is an indicator of the current state of plastics processing survey based on industry responses regarding new orders, production, backlog, employment, exports and supplier deliveries. Over 50 is expansion. Under 50 is contraction.

The October GBI shows plastics processing is still contracting overall, but some areas such as new orders and exports improved slightly, while prices received contracted.

The GBI Components Scorecard reports the monthly change rate of primary composites market factors contributing to the overall monthly index reading.

Reading the Scorecard:

Color indicates where a component value falls relative to 50 for the current month. Green indicates expansion; red indicates contraction.
Shade indicates a value’s distance from 50; the darker the shade, the further from 50.
Direction indicates a value’s change versus the previous time period. Pointing up is always better.

The GBI Future Business Index is an indicator of the future state of the plastics processing market from industry respondents regarding their opinion of future business conditions for the next 12 months. Over 50 is expansion, under 50 is contraction.

The index remained positive and improved from last month by 1.5 points with average spend increasing nearly 15%.The index remained positive and improved from last month by 1.5 points with average spend increasing nearly 15%.

Find the latest plastics processing market research and reporting at GardnerIntelligence.com.

Numbers in Perspective

Perc Pineda, Ph.D., Plastics Industry Association

Business data can be viewed with a “half-glass full” or “half-glass empty” perspective. The GBI Plastics Processing Index remained virtually unchanged in October at 43.2, matching September’s month-over-month reading and the three-month moving average. While it has stayed below the 50-growth threshold, it has not significantly declined from the recent six-month low of 42.2 in August.

The production component of the GBI showed slight improvement in October, increasing from 40.9 in September to 41.1. However, the three-month moving average reflects continued weakness in plastics production. Optimism remains, however, as the future business component of the index has shown two consecutive months of improvement.

As a sector closely tied to economic growth, the 2.8% real GDP increase in the third quarter —particularly the 3.7% rise in personal consumption expenditure, including 8.1% growth in durable goods, 4.9% in nondurable goods and 2.6% in services — indicates that demand for plastics and plastics products has held steady.

Last year, 87.6% of plastic products went toward personal consumption, and that percentage is likely to be similar this year. Weakness in residential construction, driven by high interest rates, partly explains reduced plastics manufacturing. Elevated inventories continue to restrain production growth, as plastics and rubber product inventories — total and work-in-process — have trended sideways this year.

The Federal Reserve cut rates in November by 25 basis points, bringing the Fed funds rate to a target range of 4.50%–4.75%. Lower interest rates should reduce risk aversion in the business sector, stimulating investment in new products and projects, and are likely to boost business activity across the plastics industry supply chain.