Life Cycle of Plastics: From Pump to Parts

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Fourth quarter economic climate survey

by Scott Franklin
February/March 2008

The plastic industry’s fourth quarter results reflected the slowdown experienced throughout the economy. While the third quarter showed a modest 3-percent growth in sales, IAPD members reported sales of only 1 percent in the final quarter of 2007. Nearly one-third of respondents indicated they experienced a drop in sales, the greatest negative percentage since the first Economic Climate Survey in 2005.

Average fourth quarter output rose 1.7 percent, with about half of responding members reporting that production or fabrication was flat or declined during that period. The average change in backlog for participating companies was a negative 0.8 percent. These most recent operational indicators provide a stark contrast with results one year earlier when median growth for fourth quarter 2006 sales, output and backlog grew between 3.5 and 4 percent.

Manufacturers fared better in the fourth quarter than their distributor/fabricator counterparts. The average sales increase re­ported by manufacturers was 3.1 percent, compared to a negative 0.3 percent for distributors/fabricators.

The Federal Reserve’s reductions in the discount and federal funds rate had an impact on American lending rates. Nearly one-third of members reported that their borrowing costs were lower than in the third quarter. In contrast, nearly 60 percent of members in non-NAFTA countries (primarily Europe) indicated that bank lending rates had increased since the third quarter.

Despite the sales slump, only 5 percent of IAPD members intend to decrease hiring in the second quarter. There was virtually no difference in hiring plans for manufacturers and distributors/fabricators.

The average quarterly increase for UHMW-PE was 3 percent, but the median increase was only 1 percent. The median and mean increase for PP was 4 percent. Members re­ported an average rise of 1.5 percent for PTFE, but fourth quarter prices were flat when changes were measured using the median.

Scott Franklin is a principal at First Generation Consulting and holds a master’s degree from the London School of Economics. He develops seminars, speaks and writes about economic issues facing the business community. He can be reached at (913) 642-6951 or by e-mail at scott@firstgener.com.