he U.S. economy is expected to continue expanding in 2027, but businesses should prepare for slower growth, persistent cost pressures and increasingly divergent conditions across industrial markets.

That was the central message delivered by senior forecaster, Connor Lokar, at ITR Economics, during the featured economic keynote at the 2026 IAPD Annual Convention in Atlanta.

Drawing on economic forecasts, leading indicators and industry-specific data, Lokar outlined the opportunities, challenges and business strategies shaping 2027 and beyond.

ITR Economics forecasts continued U.S. economic expansion through 2028, although growth is expected to moderate beginning in early to mid-2027, with the slowdown becoming more pronounced during the second half of the year.

Lokar characterized the anticipated slowdown as a “soft landing” rather than a broad recession. Some markets will continue expanding, others will contract and many will experience relatively flat conditions.

For performance plastics companies, Lokar emphasized that industrial production is a more meaningful economic indicator than gross domestic product (GDP), which includes substantial service-sector activity that does not directly reflect conditions in manufacturing and distribution.

U.S. industrial production and plastics products production have been recovering from the physical goods recession of 2023 and 2024. However, leading indicators suggest that growth will begin losing momentum during 2027.

Lokar cautioned executives against projecting strong 2026 performance directly into their 2027 budgets. Companies that overestimate demand risk carrying excess inventory, expanding capacity unnecessarily or making investments at the wrong point in the business cycle.

Lokar highlighted considerable variation among the end-use markets served by performance plastics companies.

Data centers, power generation and electrical infrastructure are among the strongest growth opportunities. Expanding artificial intelligence infrastructure is driving investment in computing equipment, cooling systems, power generation and electrical capacity. ITR expects these markets to maintain favorable momentum through 2027.

Aerospace remains another strong market, with production growing 13.1% on an annualized basis. However, more recent indicators suggest that growth is beginning to moderate.

Medical equipment and supplies could offer a countercyclical opportunity. Following several challenging years, production indicators are beginning to improve, and the sector is generally less sensitive to industrial business cycles.

Automotive manufacturing is expected to remain relatively flat through 2027, constrained by vehicle affordability, borrowing costs and consumer purchasing conditions.

Residential and commercial construction will also face continued challenges. Elevated mortgage rates and financing costs are expected to limit residential construction growth until 2028. Outside of data centers, nonresidential construction remains weak, with ITR anticipating relatively flat conditions.

For distributors, fabricators and manufacturers, these differences reinforce the importance of understanding which end-use markets are driving customer demand and adjusting business strategies accordingly.

Lokar identified what ITR Economics calls “profitless prosperity” as a defining business challenge through the remainder of the decade.

Even as revenues increase, businesses will continue confronting higher costs for materials, labor, energy, transportation, insurance and other operating expenses.

ITR expects inflationary pressures to ease somewhat during 2027, but Lokar emphasized that slower inflation does not mean prices will decline.

Rising oil prices represent another significant risk. Although the United States is less dependent on Middle Eastern oil supplies than in previous decades, global petroleum pricing continues to affect consumers, transportation and plastics-related input costs.

Lokar also cautioned against anticipating a return to historically low interest rates. Elevated borrowing costs will continue influencing capital investment, construction activity and consumer purchasing decisions.

Protecting margins through disciplined pricing, cost management and productivity improvements will remain essential.

Looking beyond 2027, Lokar reiterated ITR Economics’ longstanding forecast of a prolonged economic downturn beginning around 2030 and extending into the middle of the decade.

ITR attributes this outlook to demographic pressures, rising health care and entitlement obligations, persistent inflation and increasing federal debt.

Although the forecast is significantly more challenging than the near-term outlook, Lokar emphasized that businesses could position themselves to withstand economic disruption and capitalize on opportunities.

He encouraged executives to strengthen liquidity, manage debt, evaluate exposure to more resilient markets and carefully consider the timing of major investments.

Perhaps his most important recommendation was to incorporate external economic indicators into business forecasting. Rather than relying solely on customer projections, sales pipelines and internal expectations, companies should identify three to five leading indicators that correlate with their business performance.

Tracking those indicators alongside company-specific revenue and volume trends can help leaders anticipate changes in demand and make more informed decisions about inventory, staffing, capacity and capital expenditures.

For performance plastics businesses planning for 2027, Lokar’s overarching message was clear: Economic growth will continue, but success will increasingly depend on understanding where opportunities exist, anticipating changes in the business cycle and making decisions based on data rather than assumptions.