Back-to-school spending remains robust, could increase demand for plastics

With students going back to school very soon, back-to-school shopping is in full swing, and this could increase the demand for plastics, eventually, according to the National Retail Federation (NRF). This type of shopping has been been recorded as early as July retail sales numbers. According to the NRF, aside from school supplies, a back-to-school shopping cart could include electronics, clothing, shoes, textbooks, and dormitory furnishings with plastics and plastic products playing a vital role. The sales performance at retailers where this merchandise can be purchased showed positive, albeit modest monthly growth. 

July's advanced retail sales report shows a 1.0 percent month-over-month (M/M) increase and 2.7 percent year-over-year (Y/Y) growth in retail and food services sales. The key driver was a 4.0 percent rise in motor vehicle sales. Non-store retailers, primarily online shopping, saw the largest Y/Y increase at 6.7 percent. Additionally: 

• General merchandise sales rose 0.5% M/M and 2.7% Y/Y.
• Department store sales fell 0.2% M/M and 0.3% Y/Y.
• Non-store retailers saw 0.2% M/M growth and 6.7% Y/Y.
• Electronic sales* increased 1.6% M/M and 5.2% Y/Y.

In July, the NRF released its annual Back-to-Class survey, projecting total back-to-school spending to reach $39 billion, with average household spending at $875—down 4.9 percent and 1.7 percent from last year, respectively, but still significantly higher than the four years since 2019. Back-to-college spending is also expected to hit $87 billion, with $1,365 per household. Given the heavy reliance on plastics for these items, such a spending trend could increase demand for the plastics industry, affecting new orders, production, and shipments. 

Given that back-to-school merchandise contains plastics and plastic products, growth in retail sales would be positive for domestic plastics production and plastics imports. Although it may seem tempting to link an increase in back-to-school spending estimates directly to increased plastics production, such extrapolation would be misleading for three main reasons. 

First, back-to-school supplies involve various materials, manufacturing processes, and sourcing lead times, which vary across online and physical stores, with physical stores requiring more time. Producers must align their production and delivery schedules with retailers' deadlines. Positive back-to-school retail numbers in July likely reflected earlier plastics shipments.  

Second, inventory levels are crucial. Retailers' inventory-to-sales ratios can influence whether sales growth translates into new orders for wholesalers or suppliers. Similarly, if suppliers already have inventory, they will prioritize moving those products before replenishing based on their shipment forecasts.

Third, product development and trends matter. While not all back-to-school merchandise requires yearly updates, processors offering new sustainable production methods, such as those featuring recycled materials, could stand out in the market. 

In summary, as the 2024-2025 school year approaches, back-to-school spending remains robust, according to the NRF, despite being slightly lower than last year. The numbers underscore the ongoing demand for key categories like electronics, clothing, and dorm supplies—many of which rely on plastics. While sales figures show modest growth, the impact on the plastics industry is nuanced, influenced by factors such as production lead times, inventory levels, and product innovation. The industry's ability to efficiently meet demand will be crucial in navigating these dynamics. Overall, the increase in back-to-school retail sales has a net positive effect on plastics processing.