Perc Pineda, PhD
Chief Economist, PLASTICS
Although initial GDP estimates indicate the economy slowed in Q1, manufacturing grew 1.1% year-over-year by the end of the quarter. A 0.3% uptick in March marked the second consecutive monthly increase, contributing to a modest rise in capacity utilization—from 77.0% in February to 77.2% in March.
Manufacturing is the primary customer of the plastics industry. While plastics production rose 1.1% in March compared to the previous month, it remained soft, down 2.1% from a year earlier. Capacity utilization in plastics and rubber products manufacturing improved from 70.0% in January to 71.0% in February and 71.7% in March, reflecting the broader trend in manufacturing.
Utilization, Inventory Trends Offer Mixed Signals
One source of reassurance for businesses is the slack in U.S. manufacturing capacity. Over the past decade, capacity utilization in manufacturing peaked at 80.0% in March 2022, and at 87.1% in plastics manufacturing in December 2018.
Whether the recent gains signal an inflection point—reversing the interest-rate-driven slump in U.S. manufacturing—remains uncertain. Constraints on imports of production inputs and equipment not currently made in the U.S. continue to pose downside risks. However, elevated total manufacturing inventories—above $840 billion since May 2022—provide some buffer. In March, total inventories rose to $865.3 billion, while work-in-process inventories remained above $240 billion over the same period.
In plastics and rubber products manufacturing, total inventories have steadily declined from a peak of $35.3 billion in August 2022 to $33.0 billion in March 2025.
Import Gains Concentrated in Select Categories
A notable increase in imports during the first quarter—likely in anticipation of higher tariffs—could push inventories higher. Imports in the first quarter rose 26.3% compared to the same period last year. This rise could help mitigate supply chain disruptions by boosting inventory levels. Imports of plastics materials and products (HTS Chapter 39) increased 3.4%, while the largest jump was in natural or cultured pearls, precious and semi-precious stones (Chapter 71)*, which increased by 460.9%. Organic chemical imports (Chapter 29) surged 260.7%. Imports of consumer products also rose, including a 112.7% increase in cocoa and cocoa preparations (Chapter 18), along with notable gains in coffee. Overall, however, the increase in imports was not broad-based but rather concentrated in select categories, potentially raising inventories in specific industries.
While recent data show signs of improvement in manufacturing, challenges remain. Rising capacity utilization and increased inventories offer some optimism, but ongoing uncertainty around tariffs and trade policy may temper broader economic momentum.
*Chapter 71 of the U.S. Harmonized Tariff Schedule covers natural or cultured pearls, precious or semiprecious stones, precious metals, metals clad with precious metals, and articles thereof; imitation jewelry; coin.
