Fifth Straight Month of Growth for Processing
May’s Index comes in at 57.1 amid indications that processors are making longer-term investments to increase production capacity.
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The Gardner Business Index (GBI): Plastics Processing came in at 57.1 for May, lower than April’s 58.1 reading. For the first five months of 2018, the Plastics Processing Index averaged 57.3, representing the fastest five-month period of growth in the Index’s history. The index is calculated based on monthly surveys sent to subscribers of Plastics Technology magazine.
The latest reading is up 2.3% from the same month a year ago. However, the reading from May 2017 was the highest reading in all of 2017. The latest result was driven higher by supplier deliveries, production, and new orders. Employment, backlog, and exports all pulled the index lower. All components of the index experienced growth during the month.
May’s rising sub-indexes for employment and supplier deliveries and slower growth for new orders and production indicate that the current business cycle, which was initiated by a surge in new orders growth in early 2017, is showing signs of initial maturing. When the rate of new orders initially increases, manufacturers can make limited but immediate changes to increase production. However, to sustain increased production levels, or achieve significantly higher production, manufacturers typically must alter their supply chains and increase hiring, which often happens months after the initial new orders surge. The latest survey results for employment and expected capital spending indicate that the industry is making longer-term investments to increase production capacity.
The May index for only custom processors, while robust at 59.9, fell from the prior month’s all-time high reading of 62.4.
ABOUT THE AUTHOR: Michael Guckes is the chief economist for Gardner Intelligence, a division of Gardner Business Media, Cincinnati. He has performed economic analysis, modeling, and forecasting work for nearly 20 years among a wide range of industries. He received his BA in political science and economics from Kenyon College and his MBA from Ohio State University. Contact: (513) 527-8800; mguckes@gardnerweb.com. Learn more about the Plastics Processing Index at gardnerintelligence.com.
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