Perc Pineda, PhD

PLASTICS Chief Economist

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Following the decline in plastics products manufacturing in April, the latest data from the Board of Governors of the Federal Reserve System of the U.S. shows continuing improvements over the past four months. Although the industrial production index on plastics products is still running below the pre-COVID-19 level, as shown in the below chart, the path reversed from April's low. The same pattern is evident in the industrial production of plastics and rubber products, which members can download from PLASTICS’ website.

In the last five years before March 2020, the capacity utilization in plastics and rubber products manufacturing ran between 75.4% ~ 85.6%. In April, capacity utilization dropped to 58.0% but improved to 72.3% in August.

While the industrial production index for plastics material and resin for August is still to be released, data since August 2018 show monthly upward and downward movements that have not changed dramatically during the COVID-19 lockdowns. However, production seemed to flatten in April and May, followed by an increase in June, then a decrease in July.

In terms of capacity utilization in plastics material and resin, the figure was 84.2% in August. Over the past five years, capacity utilization ran from a low of 78.0% to a high of 95.0%. One could argue the great economic disruption of the coronavirus pandemic has affected the plastic industry's material and resin sector the least.

Although lockdowns have adversely impacted industries across the board, their effect on the plastics industry has been largely a function of changes in demand in plastic end-markets. The demand for durable goods has decreased more than the demand for nondurable goods. Both durable and nondurable goods sectors are served by plastic materials and products.

It should be underscored that plastics are part of the solution to the COVID-19 health crisis. Plastics are used in medical equipment and supplies, including personal protective equipment. Plastics are also a key component in the production, packaging and distribution of consumer essentials. Both sectors broadly require different types of plastic materials and resins.

While there are still risks to economic recovery, recent data show a leveling-off of the downturn. Retail and food services sales since June have been running above pre-COVID-19 levels, despite an economy below full employment.