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Numbers in Perspective

Perc Pineda, Ph.D., Chief Economist, Plastics Industry Association. Source: PLASTICS

Modest gains in the GBI: Plastics Processing in June suggest that downside risks from ongoing industry challenges — particularly tariffs and trade disruptions — may be less severe than expected, while also signaling early signs of stabilization. The total index rose slightly to 48.9 in June from 48.5 in May, with the production component increasing for the second consecutive month to 49.4.

The incremental improvements in monthly plastics processing, as reflected in the GBI, point to continued weakness in key plastics end markets. Residential construction remained soft. New single-family home sales fell 13.7% in May from April and were down 6.3% from a year earlier. The Industrial Production Index for construction supplies declined for the second straight month — down 0.7% in May following a 1.2% drop in April — indicating that a turnaround in residential construction spending has yet to begin. 

Still, early signs of stabilization could be a prelude to a more robust recovery. For instance, although automotive and light truck sales declined to a seasonally adjusted annual rate of 15.6 million units in May — down from 17.3 million in March — total motor vehicle assemblies rose 7.2% from April, marking a 3.4% increase year-over-year.

From a broader perspective, the second quarter proved weaker for the U.S. manufacturing sector. Capacity utilization flattened in April and May, halting the upward trend seen from January through March. Given that manufacturing is a key customer of the plastics industry, this suggests there is still room for higher utilization — opening the door for import substitution through increased domestic production.

While the rise in backlog orders — both month-over-month and year-over-year — in the June GBI may reflect various factors, one key takeaway remains: Growing backlogs indicate more unfilled orders awaiting completion or delivery. It’s worth considering that import substitution may be playing a role in this trend.