Perc Pineda, PhD
Chief Economist, PLASTICS
August 6, 2025
Last week was packed with economic data for us industrial economists—analyzing what it all means for our industries. Since its release, there have been no shortage of analyses and plenty of speculative prescriptions on where the economy might be heading across different industries and markets. Many of these prognostications will likely be proven wrong—much like the alarmist forecasts of a U.S. recession in the spring, which did not materialize. Yet, many of those predicting an imminent recession were also projecting a stable labor market with low unemployment. While uncertainties persist in the economy, forecasts made during heightened uncertainty often exaggerate downside risks in any outlook.
The report from the U.S. Bureau of Economic Analysis showed that the U.S. economy expanded by 3.0% in real terms in the second quarter, following a 0.2% pullback in the first quarter. Based on the advanced GDP estimate, the economy’s output continues to run above its long–term trend. For mature industries like plastics, growth is expected to track the broader macroeconomy. Thus, an increase in economic output is welcome news for many industries. To put the second-quarter GDP growth figure into perspective, three key factors should be considered.
Trade and tariff impact
The reversal in GDP growth—from a 0.2% decline to a 3.0% increase—was driven primarily by a significant decrease in imports, which subtract from GDP. Imports fell by 30.3%, with goods imports down 35.3% and services imports down 5.4%. Exports, which add to GDP, declined by 1.8%, reflecting a 5.0% drop in goods exports and a 4.4% increase in services exports. Based on these results, it’s easy to see how higher tariffs can temporarily boost GDP by sharply reducing imports.
Household sector stayed engaged
In addition to trade, consumer spending remained resilient in the second quarter. Real personal consumption expenditures (PCE) rose by 1.4%, a significant improvement from the 0.5% increase in the first quarter. Durable goods consumption rebounded by 3.7%, recovering from an equal decline in the previous quarter. Nondurable goods consumption slowed to 1.3% from 2.1%, while services consumption rose 1.1%. The continued growth in real PCE has positive implications for the plastics industry. For example, real PCE on food and beverages for off-premises consumption remained stable at $1.18 trillion in both the first and second quarters—indicating steady demand for food and beverage packaging. Additionally, real PCE on motor vehicles and parts rose from $593 billion in Q1 to $615 billion in Q2, potentially signaling increased demand for plastics in automotive manufacturing. As much as 87.6% of plastics manufacturing ultimately supports the consumption of goods and services, based on PLASTICS 2024 Size and Impact Report. This year’s edition of the report, which will be released on September 16th and will once again show the positive role plastics play in supporting household consumption of goods and services.
Business sector recalibrating investment across asset classes
The 15.6% decline in real private investment spending was driven primarily by a 10.3% drop in investment in nonresidential structures and a 4.6% decline in residential fixed investment—pointing to constrained growth in plastics demand for building and construction. Persistently high interest rates, combined with ongoing tariff uncertainty, continue to weigh on business investment decisions. However, investment in industrial equipment rose by 4.5%, consistent with the 4.7% gain recorded in the first quarter of 2025. While this increase may partly reflect the higher cost of imported equipment due to tariffs, it also suggests continued activity in industrial expansion. With overall U.S. manufacturing capacity utilization at 76.8%—and 71.3% in plastics and rubber products manufacturing—there is still room for growth.
Looking ahead, businesses that have invested in higher domestic manufacturing content are less likely to be affected by elevated tariff rates. Given the continued reliance on imported inputs and equipment, investment in industrial equipment will likely remain supported—as long as tariff rates do not become cost-prohibitive. Fair trade is something all industries can support. Notably, plastics may serve as a cost-effective substitute for other packaging materials that are no longer economically viable due to tariffs—reinforcing the industry’s role in supporting domestic production and supply chain resilience.
In the latest Plastics Quarterly Forecast, U.S. real GDP was projected to grow by 2.0% in the second quarter and 1.5% for the year. The International Monetary Fund now expects U.S. GDP to grow by 1.9% in 2025 and 2.0% in 2026. Achieving such growth will likely depend on resolving tariff-related issues between the U.S. and its major trading partners.
