Mon May 1, 2017

By Perc Pineda, PLASTICS Chief Economist

The advance estimate for gross domestic product (GDP) growth from the U.S. Bureau of Economic Analysis (BEA) came in at 0.7 percent for the first quarter of 2017. This is a slow start to the year for the economy, but according to Plastics Industry Association (PLASTICS) Chief Economist Perc Pineda, the latest figures don’t dim the prospects for growth in the U.S. plastics industry.

If we look at the data over time, first quarter GDP is usually the weakest compared to the other quarters in a year due to a number of factors. Severe winter conditions could dampen economic activity. Consumers shop less in the first quarter as they pay down debt from their holiday shopping spree in the fourth quarter of the previous year. There are also residual effects of changes in domestic policy and global economic conditions, particularly those that occur in the later part of the previous year.

With the unemployment rate at 4.5 percent, a turnaround in business confidence, and more confident consumers (disposable income increased 3.4 percent in the first quarter of this year) my sense is that the second estimate of the first quarter GDP will be higher. Business investment spending also rose in the first quarter—the third consecutive quarter of increase following three quarters of declines that started in the fourth quarter of 2015.

Durable goods consumption, particularly in motor vehicles, fell in the first quarter, but fixed residential investment spending rose by double digits (13.7 percent) during the same period. This confirms my view that the U.S. housing market is still in recovery mode.

Exports of goods also rose 8.3 percent. Taken together, the uptick in housing and exports is consistent with job gains in construction and manufacturing in the first quarter. Although it appears that the economy was off to a slow start, if the housing market stays upbeat and export markets remain healthy, the outlook for the U.S. plastics industry moving forward remains positive.