US Economy Slows; Is A Recession Coming?

Shipments of injection molding machinery in North America declined 2.4 percent in the July-to-September period compared to the same quarter last year, according to data released by the Society of Plastics Industry (SPI).

Shipments remain at a relatively high level, but there are growing indications that the American economy is slowing and some banks are even saying there is a high possibility of a recession in 2016.

The new monthly business report issued by the Institute of Supply Management states: “Economic activity in the manufacturing sector contracted in November for the first time in 36 months, since November 2012.” The November index was 48.6 percent and the New Orders Index registered 48.9 percent, a decrease of 4 percentage points from October.

Many economic forecasters are bearish because of a negative trend in corporate profits, which have fallen more than five percent year-to-year. “On most (but not all) of the occasions when this variable fell to its current level, a recession began within a few years,” write JPMorgan economists in a recent report. Profits are being hurt by weak commodity pricing and poor foreign earnings.

One of the best current views of the U.S. economy is railcar loadings.

Major U.S. railroads reported a 5.1 percent drop in carloads since the beginning of October, topping decreases of 1.6 percent in the third quarter and 1.8 percent in the second.

For its part, the SPI remains upbeat.

“The manufacturing sector hit a plateau in the third quarter, but this should be considered a period of consolidation rather than a harbinger of an impending economic recession. The plastics industry posted an increase in output, but the growth rate decelerated. This plateau notwithstanding, the recovery in the US economy is still intact, and the plastics industry will continue to be a growth leader in the U.S. manufacturing sector. Household incomes are rising, residential construction activity is accelerating, and economic growth of 2.5 percent is expected for the coming year. For the plastics industry, stronger consumer spending in the coming months will offset the drag on some manufacturers caused by cheaper oil and a stronger dollar,” says SPI economist Bill Wood.

Investors seem skittish, if not outright scared.

The Dow Jones Industrial Average dropped 12 percent from May 14 to Sept. 4, then rose some and has been jitterbugging since. The index was down 152 at noon today.

Stock prices for Milacron, the largest publicly owned plastics company in the United States, are down 36 percent in the past three months.

 

 

About Doug Smock

Former Chief Editor at Plastics World and Senior Technical Editor Design News
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