PLASTICS: Despite slow Q3, more growth expected
By PLASTICS Chief Economist Perc Pineda, Ph.D.
Introduction
The U.S. economy’s slowdown in the third quarter may have come as a surprise to many after stellar growth rates in the first and second quarters. Following a 6.7 percent increase in output in the second quarter, the 2 percent increase in the third quarter came in lower than forecasted. At the close of the third quarter, the U.S. was roughly a $19.5 trillion economy and $904.4 billion larger than a year earlier. Let’s take a closer look at how the plastics industry fits in.
Plastics industry growth prospects intact amid slower Q3
Is the U.S. economy losing its growth momentum and beginning to slow to its long-run average growth rate of around 2 percent? The answer is no. For one, the U.S. economy is still emerging from the pandemic and continues to experience an output gap. With a $19.5 trillion gross domestic product (GDP) compared to a $19.7 trillion potential GDP, one can argue that the output gap has narrowed, but has not closed. This means the U.S. economy continues to operate at less than full capacity and has room to grow.
It appears that the economy paused in the third quarter, as consumers pulled back. The fourth quarter, however, opened with a positive note on consumption. The advance retail and food services sales in October rose 1.7 percent from September — a 16.3 percent increase from October last year. The plastics industry keeps its fingers on the pulse of household consumption, considering that in 2020, 83.5 percent of plastics-containing goods and services went to personal consumption by households. That number is unlikely to change this year and next year, barring policy missteps such as those leading to higher energy costs, which would impact the economy’s manufacturing sector — including plastics — and would be burdensome for consumers. At the moment, the economy appears to remain in a growth path, and so, too, will the plastics industry.
While growth is in the offing for the plastics industry, it is not without challenges. Based on my estimates, the U.S. plastics industry will still have 5,700 more job openings than it did pre-pandemic. The pandemic has prompted many workers to rethink their career opportunities, which included moving from one industry to another. There is also an intra-industry movement of labor.
Supply chain pains and labor shortages caused elevated prices and higher wages that consequently increased the costs of doing business — in all industries, including plastics. Against the backdrop of an economy that is still expected to grow in 2022, the likelihood that these headwinds will start to diminish depends largely on the pace of recovery — the emergence from the pandemic — not only of the U.S., but of the global economy.
PLASTICS provides members with industry insights like this, as well as exclusive macroeconomic analysis and forecasts year-round for a tailored perspective on what might be around the corner. Learn more at www.plasticsindustry.org
PLASTICS reports growth in third-quarter shipments of primary plastics machinery.