By Perc Pineda, Ph.D.

Chief Economist

Personal consumption accounts for 79% of the plastics market. This year, the National Retail Federation predicts retail sales — excluding automobile dealers, gasoline stations and restaurants — to increase by 6.5% to 8.2%. That’s an increase between $4.3 and $4.4 trillion in retail sales over 2020.

That’s good news for the plastics industry. While monthly retail and food service sales flattened in April, last month still saw a 51.2% sales increase over April last year, according to the U.S. Census Bureau.

A little history: last April, retail and food services sales fell 14.7% to $410 billion as the economy shut down due to the pandemic. Last May, however, the figure rebounded by 18.0% to $526.9 billion, erasing the April decline. Online crisis-shopping fueled the increase in retail sales, as most brick-and-mortar stores closed. By December, retail sales amounted to $536.0 billion, surpassing pre-COVID-19 levels.

2021 opened with strong retail and food service sales, rising 9.4% in January from January 2020. Following a 6.5% year-over-year increase in February, retail sales soared again in March by 29.0%. Retail sales were unchanged in April from March, which reflects sustained consumer engagement.

Motor vehicles and parts sales saw an increase of 17.1% from February to March 2021 and were up 73.6% year-over-year. In April, motor vehicles and parts sales increased by 2.9% from the previous month but was 104% above April 2020. The automotive industry is a key end-market for plastics.   

Retail sales of electronics, appliances and building materials also hold clues. Sales of electronics and appliances, as well as building materials, increased 17.5% and 13.9% respectively from February to March this year. Electronics and appliances retail sales rose 35.8% March-to-March and 139.0% April-to-April. While building materials saw a meager 0.4% decrease in April from March, it was up 33.8% from a year earlier. A 24.7% increase in health and personal care retail sales in April from April last year suggests strong demand for plastics in those end markets.

Although clothing stores sales decreased by 5.1% from March 2021 to April 2021, it increased 726.8% from a year earlier. As the economy continues to reopen and vaccination rates increase, shopping behavior is easing back to pre-COVID-19 times including in businesses that saw sales significantly slowed due to the pandemic. While food and beverage retail sales rose by a meager 0.4% in April 2021 from March 2021 and only 1.5% above April 2020, it reflects an increase in consumer confidence affecting their shopping behavior. Food and beverage retail sales jumped 26.7% in March 2020 from the prior month as consumers stockpiled when the economy shut down. Stockpiling of food and beverage is no longer necessary today.

The demand for plastics and plastic products could continue to grow, as demand for light vehicles is strong, and the service sector of economy has yet to fully reopen. However, if supply-chain problems persist, lowering inventories and slowing production, supply shortfalls could stifle retail sales.