Looking Beyond Total Inventories: Signals from the Plastics Supply Chain

Perc Pineda, PhD
Chief Economist, Plastics Industry Association

Manufacturing industries’ total inventories are the sum of materials and supplies inventories, work-in-process inventories, and finished goods inventories. Each of these inventory categories provides insights for businesses across the supply chain. A declining finished goods inventory, for instance, could mean many things. On the one hand, it may indicate strong sales, which means shipments have been rising faster than production, thereby decreasing finished goods inventory. It is also possible that this decline results from supply chain bottlenecks, which cause low materials and supplies inventories and, therefore, slow production. Such a scenario would be reflected in declining work-in-process inventories. On the other hand, lower work-in-process inventories could mean that orders are weak, necessitating a pullback in production and reducing finished goods accordingly.

Plastics and Rubber Products Inventory

One might expect that, mathematically, the total inventories for plastics and rubber products manufacturing in May—as estimated by the U.S. Census Bureau—would equal the sum of its components: materials and supplies ($15.4 billion), work-in-process ($4.6 billion), and finished goods ($15.8 billion), totaling $35.8 billion. However, the official total reported by the U.S. Census Bureau is $35.6 billion.

This small discrepancy occurs because each inventory category is seasonally adjusted individually, which can produce slight differences when the components are aggregated. Therefore, beyond the headline total, what is more meaningful for businesses is to analyze the individual inventory components in the context of changing economic fundamentals and broader industry trends, which can help explain the differentiated rates of change across categories over time.

In May, total plastics and rubber products manufacturing inventories increased 0.5% year-over-year (YoY). Materials and supplies as well as finished goods inventories edged down 0.1% and 0.2%, respectively. Work in process inventories, however, rose 4.6% over the same period. Looking at the YoY changes in each category over January 2009 to May 2026 suggests that materials and supplies tend to lead total inventories by about a month, while work in process and finished goods are largely coincidental inventories – or moves simultaneously with total inventories because it reflects ongoing production activity.

Reaction to Changes in Macroeconomic Fundamentals

With materials and supplies serving as a leading component of total inventories, changes in materials inventories often precede changes in overall manufacturers’ inventories. Consequently, economic fundamentals such as inflation influence total inventories over time. This relationship has become particularly evident as resin prices have risen in response to higher energy prices in recent months. The Producer Price Index (PPI) for chemical and allied products, particularly plastic resins and materials, increased 3.2% year over year in April after consecutive monthly declines since May 2025, before accelerating sharply to 19.5% year over year in May 2026. The decline in materials and supplies inventories in May likely reflects the market’s supply and demand response to rising input prices, as manufacturers adjusted purchasing behavior in response to higher costs.

At the same time, strengthening consumer demand supported higher finished goods inventories. Real personal consumption expenditures (PCE) increased 2.31% year over year in May. Durable goods PCE—which includes plastics-intensive products such as motor vehicles and parts—rose 2.28%, while nondurable goods PCE increased 2.33% over the same period. Meanwhile, services PCE increased 2.05%, with healthcare services consumption, a sector that relies extensively on indispensable plastics products, rising 2.54% year over year. These demand-side developments have likely encouraged manufacturers to maintain or increase finished goods inventories to meet downstream demand.

Future Work at PLASTICS

While the preceding discussion provides useful corollary evidence, which is based on nominal inventory values, a more rigorous analysis—such as examining inflation-adjusted inventory values—is needed to uncover forward-looking insights into the plastics industry supply chain. Recognizing that such research could benefit PLASTICS members and the broader industry, the PLASTICS Economics and Industry Research Department is currently developing a white paper that examines the dynamic relationships within the plastics supply chain and how broader economic, business, and industry-specific factors shape inventory behavior and industry performance. Given plastics’ indispensable role as an input across a broad range of manufacturing industries, a well-functioning supply chain supports production throughout the economy and, ultimately, the household sector, whose personal consumption expenditures reached an estimated $16.8 trillion in May. Understanding these relationships is therefore critical not only for the plastics industry but also for assessing broader economic conditions and future growth prospects.