Economist to plastics processors: Invest in next two years, tougher times beyond

Jim Johnson

Michael Feuz

Plastics processors would be smart to take advantage of opportunities to better position their companies over the next couple of years because times are going to change, according to one economic research and consulting firm.

"Interest rates will continue to come down. Take advantage of that. Invest in your business," Michael Feuz, an economist with ITR Economics of Manchester, N.H., told attendees at the recent Manufacturers Association for Plastic Processors conference in Indianapolis. "Interest rates will be at their lowest for the rest of this decade, middle of next year, second, third quarter."

"If you're looking to leverage financing for strategic initiatives, that's your sweet spot. I would not put much stock in the long run here," he said.

The economist told plastic processors in Indianapolis to make their moves in the shorter term because he anticipates inflation will return in 2027 to 2029. "Rates will tick up again," he said.

Feuz said the next two years or so is a good time for businesses to invest in automation as workers will continue to be hard to find.

"Improve your efficiencies. Labor constraints aren't going anywhere. You need to improve your labor productivity," he said. "Automate where you can. And think about these investments in five-year terms. We see significantly more economic difficulties in the next decade, the 2030s."

The economist, while advocating investments in the short-term, also told the crowd to watch debt levels going into the new decade.

"You want to have less debt in your business around 2029. So plan accordingly," he said.

"Right now is the get-ready for '25 and '26. There's going to be more growth in the next two years, regardless of who wins this election. So right now is when things are a little cool, maybe a little flat, a little soft, sluggish. Take advantage of that. Prepare. Because next year we're going to get higher growth rates, especially as we get to the second half of next year," he said.

"You're going to have consumers more confident. Because interest rates are down, inflation is continuing to tick down. Just more confident and a higher-growth economy," Feuz said. "Your customers, businesses, will be feeling that as well. Prepare for that demand to come back. Take advantage of it."

He called both 2025 and 2026 as a grace period for tougher economic times expected to arrive from 2027 to 2029.

As companies prepare for the growth window Feuz said will occur, he also told the crowd that now is an important time to preserve pricing. "Protect your pricing if it's difficult to raise them now. Protect them by knowing your competitive advantage," he said.

"What do we do that's unique, that no one else can replicate? If your competition can replicate it, it's not a competitive advantage. But know what they are and really equip your sales folks with them. Sales folks, sometimes they get price scared, they want to give discounts," Feuz said.

"If they're equipped with those competitive advantages and truly believe in them, that's how you get them to lead with confidence," he said.

He also said the next couple of years will provide opportunities to build profit while preparing for more difficult market conditions at the end of the decade.

"When we get into '27 to '29 and that inflation starts coming back, that's going to put pressures on your margins. "Take advantage of the more confident robust investment of 25-26.a pricing strategy that will behoove most businesses we see at ITR is one that leverages more price increases in the next two years but smaller increments," he said. "Folks will be confident, they will be willing to take it. Implement the right pricing strategy, maybe they don't even notice it."

"Then when we get into 2027 you are not in the position where you have to raise prices because inflation has come back at a level that won't be received well by your customers," Feuz said.

* Source : https://www.plasticsnews.com/news/economist-plastics-processors-invest-next-two-years-tougher-times-beyond