Processor Business Rebounding

With a November reading of 53, Gardner’s Plastics Processors’ Business Index climbed for the first time since May. In November, the plastics processing market grew at its fastest rate since March and its second fastest rate since April 2012. In three of the four months from August to November, the Index was higher than the same period a year before.

New orders grew for the second time in three months, hitting their fastest rate of growth since March. Production grew for the eleventh consecutive month. This was the fastest growth in production since April 2012. Because production has been consistently growing faster than new orders, backlogs continue to contract. But backlogs contracted at their slowest rate since April 2012. This is a sign that capacity utilization at plastics processors should be improving in the upcoming months. Meanwhile, employment grew at its fastest rate since June 2012.

Exports have been contracting for some time, as the dollar remains relatively strong. Supplier deliveries continued to lengthen.

Materials prices continued to increase, but grew at their slowest rate since November 2012. However, prices received by processors decreased for the second month in a row, which is putting pressure on profits. Future business expectations have improved more in each of the last three months, reaching their highest level since March 2012.

Processing facilities with more than 50 employees continued to grow at a very strong rate. But November saw improvement for smaller facilities, too. Processors with 20-49 employees grew for the first time since July and the second time since March. Processors with fewer than 19 employees continued to contract, but at the second-slowest rate since September 2012.

The Pacific region grew for the second month in a row and at the fastest rate for all regions in November. The West North Central, South Atlantic, and East North Central regions all grew in November after contracting in October. New England and Middle Atlantic regions contracted in November.

Future capital spending plans were at the highest level in the history of the index, which dates back to December 2011. November’s planned spending was roughly 33% above the historical average and 45.6% higher than in November 2012. This is the fourth straight month that the month-over-month rate of change grew by more than 40%.

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.