Manufacturing activity rises, but it may not be enough: PLASTICS analysis
Manufacturing activity improved in the first half of 2026, but whether the trend will continue long enough to lift the plastics industry is unclear, according to the latest economic analysis by Perc Pineda, chief economist for the Plastics Industry Association (PLASTICS).
In a blog post, Pineda noted that U.S. manufacturing activity closed the first half of 2026 with June showing a 0.3 percent increase month-over-month (MoM), and 1.6 percent year-over-year (YoY), based on the Industrial Production Index for manufacturing. In July, activity increased 0.2 percent MoM, 1.3 percent YoY.
What happens in the second half of the year may provide “an early indication of whether recent manufacturing gains are the beginning of a broader acceleration — or simply a modest improvement within a more difficult structural transition,” he wrote.
Respondents to PMM’s midyear survey conducted in June indicated processors remain cautious about equipment investments even as many expect the economy to improve in the second half of the year.
Pineda said a main goal of the second Trump administration’s trade and tariff policy is to boost U.S. manufacturing, domestic merchandise demand and competitiveness, but “policies intended to reverse longstanding economic practices — such as U.S. consumers’ reliance on imported goods and manufacturers’ reliance on imported capital equipment and intermediate inputs — are likely to generate negative effects in the short to medium term before their intended benefits are realized, if at all, over the longer term.”
He cited several factors working against the transition.
Industrial production rose while employment declined between 1972 and the financial crisis of 2008-09, and although employment increased in the wake of the COVID-19 recession, Pineda wrote, “the longer-term trend remains clear: U.S. manufacturing has been producing more with a smaller workforce. Automation, capital deepening, and improvements in manufacturing technology have made this possible.”
Expanding manufacturing capacity now will depend on new technologies and equipment, he wrote, “much of which relies on globally sourced components and intermediate inputs. Higher tariffs on these inputs could consequently make the transition toward greater domestic production more costly and less smooth.”
U.S. manufacturers will also need to build, equip and staff factories, and develop supply chain networks, which cannot be done quickly in response to the tariffs; developing competitive domestic alternatives to imports could take years, Pineda wrote, during which higher costs would be passed along to manufacturers and consumers.
Competitiveness also depends on access to global markets and globally integrated supply chains, and restrictions on imports can raise production costs even on products made in the U.S.
“U.S. manufacturers facing higher domestic costs may become less competitive in export markets. Policies designed to increase domestic manufacturing may therefore initially create a tension between expanding U.S. production and maintaining the cost competitiveness needed to compete globally,” Pineda wrote.
While higher tariffs may encourage domestic production, they also raise the costs of machinery, materials and intermediate goods, and “the pace of adjustment will depend on how quickly U.S. producers can build domestic capacity, develop supply networks, adopt new technologies and maintain competitiveness in global markets,” he wrote.
“For the plastics industry, this means that continued growth in manufacturing activity would provide an important source of demand, but the path of that growth will matter. A sustained expansion in U.S. manufacturing could support plastics demand over the longer term. In the near term, however, higher input costs, supply-chain adjustments, and uncertainty surrounding trade policy could temper the pace of expansion.”
