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Tue June 26, 2018

The three leading indicators released last week - two from the U.S. Census Bureau and one from the Institute of Supply Management (ISM) - point to sustained economic activity ahead. For starters, monthly sales for retail and food services in May increased 0.8 percent from April, according to the U.S. Census Bureau. Year over year, retail sales rose 5.9 percent. Rising retail sales indicate consumer engagement and confidence. Considering the stable long-run relationship between plastics shipments and retail sales, the $4.1 billion increase in retail sales in May suggest robust consumer spending, which should buoy plastics shipments moving forward. U.S. manufacturing activity data supports this observation.

According to the ISM® Report on Business®, of the 18 manufacturing industries, 16 reported growth in May –  which includes plastics and rubber products. ISM® New Orders Index was 63.7 in May – up 2.5 percentage points from April – showing accelerated growth. The New Orders Index has stayed above 60 for the past 13 consecutive months.

Finally, new residential construction numbers for May were strong with building permits in May at a seasonally adjusted annual rate of 1,301,000. Although this was 4.6 percent lower the revised April rate, it was 8 percent higher than May last year. Housing starts in May were at a seasonally adjusted annual rate of 1,350,000 – a 5 percent in May and a solid 20.3 percent increase from a year ago. In May, housing starts for single-family increased 3.9 percent and for buildings with five units or more rose 11.3%. Single-family and multi-unit housing starts rose at a robust 18.3 percent and 27.4 percent, respectively, year over year. Considering volatility in monthly data, six-month moving average suggests a continued increase in housing starts. Housing is a major end market for plastics and impressive new residential construction data could only mean good news ahead for the plastics industry.