U.S. Economic Growth Moderates as Plastics Demand Holds Steady

Perc Pineda, PhD
Chief Economist, Plastics Industry Association

The U.S. economy continued to expand in the second quarter, although growth moderated from the pace set earlier in the year. The advance estimate from the U.S. Bureau of Economic Analysis puts real GDP growth at a 1.5% annual rate in Q2, down from 2.1% in the first quarter.

At first glance, that slowdown might seem like a reason for concern. But looking beneath the headline number, the picture is encouraging—particularly for the plastics industry.

The level of economic activity also suggests that the economy continues to operate above its estimated potential. U.S. economic output reached an estimated $24.27 trillion in Q2, about 0.8% above potential output based on estimates from the Congressional Budget Office. Over the past five years, the output gap has fluctuated between 0.6% and 2.0%, indicating that the economy has consistently operated above its estimated potential. However, economic activity will continue to cycle through periods of expansion and contraction over time.

Consumers continued to spend. Personal consumption expenditures grew 3.2% in the second quarter, a significant acceleration from the 0.5% increase in Q1. And the strength was broad-based. Spending on durable goods rose 6.8%, while nondurable goods spending increased 4.4%. Services consumption also grew, rising 2.2%.

Several of those categories are especially important to plastics demand. Consumer spending on motor vehicles and parts increased 10.5%, while spending on food and beverages purchased for home consumption rose 2.3%. Both point to continued activity in major plastics end markets.

Businesses continued to invest as well. Business investment increased 8.4% in Q2, although that was slower than the 10.6% pace recorded in Q1. Equipment investment remained particularly strong, easing only slightly from 15.8% growth in Q1 to 15.2% in Q2.

Trade provided less of a boost to overall growth. Export growth slowed to 4.5% from 10.9% in Q1, while import growth remained relatively steady at 11.5%, compared with 11.8% in the first quarter.

The GDP numbers will be revised as more data become available, but the broader message is becoming clearer: concerns about a contraction in the first half of the year are increasingly moving into the rearview mirror.

That does not mean the road ahead is without challenges. The Federal Reserve has held the federal funds rate at a target range of 3.5 to 3.75%, leaving borrowing costs relatively high. That remains a particular concern for interest-rate-sensitive markets, including building and construction, as uncertainty over the Fed’s forward guidance adds to the challenge.

Still, U.S. plastics demand has shown notable resilience. The industry continues to navigate shifting trade and tariff policies, geopolitical risks and energy price pressures while maintaining relatively stable demand. For plastics manufacturers, the key question is no longer simply whether the economy is growing. It is where that growth is occurring—and which end markets will drive plastics demand from here.