U.S. Manufacturing Output Accelerated in August


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According to data released this week by the Federal Reserve Board, total U.S. industrial production (output of the manufacturing, mining, and utilities sectors) expanded a moderate 0.4% in August, but the manufacturing sector was the strongest growing by a heartening 0.7% when compared with the previous month. Output of durable goods advanced 1.2% with the biggest gain coming from a 5.2% surge in the production of motor vehicles. Production levels for the high-tech sector escalated 1.7%.

After a strong start to the year, the overall trend in the data for the manufacturing sector this past spring and summer has been discouraging. But the situation appeared to improve in the month of August. Business surveys such as the ISM Manufacturing Index are now indicating a firmer tone for the manufacturing sector. Capital spending plans are increasing, and the export data is improving.

The growth in the data measuring total U.S. output of plastics products in 2013 has been stronger than many other sectors, but the trend in this data leveled off during the summer. For the year to date, output of plastics parts is up 6% compared to the same period a year ago, but the rate of growth has decelerated in recent months. We expect the trend to regain its momentum for the remainder of the year, and our forecast still calls for an annual increase of 6% in the total volume of plastics products this year. This follows a similar gain of 6% in 2012.

The capacity utilization rate for the plastics industry continues to hover just below the 75%-level. If these data are correct, it indicates that utilization rate for plastics processors is virtually unchanged since the beginning of the year. This is surprising given the solid rate of growth in total output, and it is certainly not sustainable in the long run. If our forecast for continued expansion in output levels holds true, then utilization rates will be pushed upward by the end of the year.