Skip to main content
Sister Publication Links
  • Sustainable Plastics
  • Rubber News
Subscribe
  • Sign Up Free
  • Login
  • Subscribe
  • News
    • Processor News
    • Suppliers
    • More News
    • Digital Edition
    • End Markets
    • Special Reports
    • Newsletters
    • Resin pricing news
    • Videos
    • Injection Molding
    • Blow Molding
    • Film & Sheet
    • Pipe/Profile/Tubing
    • Rotomolding
    • Thermoforming
    • Recycling
    • Machinery
    • Materials
    • Molds/Tooling
    • Product news
    • Design
    • K Show
    • Mergers & Acquisitions
    • Sustainability
    • Public Policy
    • Material Insights Videos
    • Numbers that Matter
    • Automotive
    • Packaging
    • Medical
    • Consumer Products
    • Construction
    • Processor of the Year
    • Best Places to Work
    • Women Breaking the Mold
    • Rising Stars
    • Diversity
    • Most Interesting Social Media Accounts in Plastics
  • Opinion
    • The Plastics Blog
    • Kickstart
    • One Good Resin
    • Pellets and Politics
    • All Things Data
    • Viewpoint
    • From Pillar to Post
    • Perspective
    • Mailbag
    • Fake Plastic Trees
  • Shop Floor
    • Blending
    • Compounding
    • Drying
    • Injection Molding
    • Purging
    • Robotics
    • Size Reduction
    • Structural Foam
    • Tooling
    • Training
  • Events
    • K Show Livestream
    • Plastics News Events
    • Industry Events
    • Injection Molding & Design Expo
    • Livestreams/Webinars
    • Editorial Livestreams
    • Ask the Expert
    • Plastics News Events Library
    • Processor of the Year submissions
    • Plastics News Executive Forum
    • Injection Molding & Design Expo
    • Plastics News Caps & Closures
    • Women Breaking the Mold Networking Forum
    • Plastics in Automotive
    • PN Live: Mergers and Acquisitions
    • Polymer Points Live
    • Numbers that Matter Live
    • Plastics in Politics Live
    • Sustainable Plastics Live
    • Plastics Caps & Closures Library
    • Plastics in Healthcare Library
    • Women Breaking the Mold Networking Forum Library
  • Rankings & Data
    • Injection Molders
    • Blow Molders
    • Film Sheet
    • Thermoformers
    • Pipe Profile Tubing
    • Rotomolders
    • Mold/Toolmakers
    • LSR Processors
    • Recyclers
    • Compounders - List
    • Association - List
    • Plastic Lumber - List
    • All
  • Directory
  • Resin Prices
    • Commodity TPs
    • High Temp TPs
    • ETPs
    • Thermosets
    • Recycled Plastics
    • Historic Commodity Thermoplastics
    • Historic High Temp Thermoplastics
    • Historic Engineering Thermoplastics
    • Historic Thermosets
    • Historic Recycled Plastics
  • Custom
    • Sponsored Content
    • LS Mtron Sponsored Content
    • Conair Sponsored Content
    • KraussMaffei Sponsored Content
    • ENGEL Sponsored Content
    • White Papers
    • Classifieds
    • Place an Ad
    • Sign up for Early Classified
MENU
Breadcrumb
  1. Home
  2. News
February 14, 2017 01:00 AM

Wrapping up a solid forecast for packaging

Bill Wood
Economics Editor
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Jessica Jordan

    Moderate growth is in the forecast for plastics packaging products.

    Market conditions for plastics packaging products will be firm this year, and I expect an incremental gain in overall demand. This does not mean that every segment of the plastics packaging industry will experience an increase. In fact, I expect there will be significant variance in the growth rates amongst some packaging segments, and some segments may very well suffer declines. But for the industry as a whole, 2017 will be another year of moderate growth. It will be comparable to the pace of growth that the industry has averaged for the past few years.

    The plastics packaging industry is mature, so the trend in packaging demand is largely driven by changes in overall consumer spending primarily for non-durable goods such as food and personal care products. Innovation will continue to be an important factor in these sectors, but I do not expect the packaging industry to create any category killers or disruptive-technologies — at least not in 2017. This means that competition will be tough and margins will stay tight.

    The basis of my outlook is my strong belief of a continuation in the prevailing trends in the overall U.S. economy. Not only is packaging a mature industry, but it is broad in its scope. It touches every household and a wide range of consumer end markets. So to understand my forecast, I need to walk you through the major trends in the macroeconomy.

    The most important economic story this year will be the fact that the U.S. finally reaches full employment. Full employment occurs at the point when all of the unemployed and underemployed workers who want full-time work can get it. In other words, there is no more slack in the labor market. We are already at a point where the number of job openings is at a record high, layoffs are low and the number of workers who voluntarily quit their jobs to find a better job (known as the quit rate) is rising. So I expect the economy will reach full employment this year.

    But the demand for labor will not stop growing just because everybody already has a job. Full employment means that aggregate demand will also continue to rise. So in order to meet the rising demand for labor at a time of full employment, employers have to offer higher wages. Wage growth is currently growing by about 4 percent on a year-over-year basis, and this rate is accelerating. So more people will have jobs, and those jobs will, on average, pay higher wages. This will result in higher spending.

    More households, more packaging

    This trend on its own is enough to keep demand for packaging products strong. But another trend that is also underpinning demand is the rise in household formations. The household is the foundation for consumption in America, but the formation rate took a dip during the recession. We have also experienced a secular shift where young adults have started to get married later and are instead choosing to live at home.

    But recent data suggest that the rate of household formations currently exceeds 1.2 million per year. This pace will put upward pressure on the residential construction data in 2017 as well as the data that measures output of consumer goods. And that is how the trend in demand for plastics packaging will also get pushed upward.

    So the changes in the data compiled by the Federal Reserve that measure the production levels of non-durable, non-energy consumer goods are excellent indicators of the trends in end-market demand for many types of plastic packaging products. If we look at the aggregate data series — total production of non-durable, non-energy consumer goods, then the reasons for the slow-growth trend that has prevailed in the packaging sector in recent years are illuminated. After expanding by a pedestrian rate of 0.7 percent in 2015, the total U.S. output of these goods unexpectedly declined by 0.6 percent in 2016. It's hard to sell more packaging units if they are making fewer of the products that go inside.

    I expect this downtrend to reverse in 2017 and register a modest gain, but the long-term trend in this data since the last recession has been flat-to-down. Americans just have not purchased this stuff in the same quantities as they did prior to the recession. A vibrant labor market combined with a steady rise in household formations will push this data upward in the coming years, but the changes will be gradual for the foreseeable future.

    If we break this data down into its component parts, then we see some variation in recent spending patterns. The output of food products accelerated in 2016 after a couple of years of subpar growth. Within the food sector, the growth in the data measuring output of meat products is still the strongest, while the trend in fruit and vegetable preserving and specialty foods production accelerated to a pace that was above the recent trend. The overall dairy data was flat, but within this sector, cheese is stronger while ice cream was weaker than expected. Production of coffee and tea products jumped, while the four-year decline in the production of soft drinks worsened.

    Production of pharmaceuticals and medicines continued a downward trend that started during the recession. Output of these products was down 1 percent in 2016, and it is down more than 20 percent from its peak 10 years ago. Another important packaging end -market that peaked 10 years ago and has since been on a downward slide is household chemicals (soaps, cleaning compounds and toilet preparations). U.S. production of these slipped by 1 percent in 2016, and it is down almost 25 percent from the peak in 2007.

    One final factor that will affect profitability of packaging manufacturers in the coming year is resin prices, and here the news is positive. As the chart indicates, resin prices are hovering near their cyclical lows at the present time. Based on the recent trends in the oil and natural gas markets, I expect resin prices to rise this year but not by much. So processors' margins are not expected to come under too much pressure. And that's the bottom line.

    RECOMMENDED FOR YOU
    Industry sees Biden bioplastics goal as serious signal
    Letter
    to the
    Editor

    Do you have an opinion about this story? Do you have some thoughts you'd like to share with our readers? Plastics News would love to hear from you. Email your letter to Editor at [email protected]

    Most Popular
    1
    Biden sets US goal to replace 90% of plastics with biomaterials
    2
    Industry sees Biden bioplastics goal as serious signal
    3
    Report urges treaty to regulate plastics like pharmaceuticals, limit growth
    4
    One injured in explosion at Ineos cumene plant in Texas
    5
    Engineering resin prices close the first quarter with a drop
    SIGN UP FOR OUR FREE NEWSLETTERS
    EMAIL ADDRESS

    Please enter a valid email address.

    Please enter your email address.

    Please verify captcha.

    Please select at least one newsletter to subscribe.

    Get our newsletters

    Staying current is easy with Plastics News delivered straight to your inbox, free of charge.

    Subscribe today

    Subscribe to Plastics News

    Subscribe now
    Connect with Us
    • LinkedIn
    • Facebook
    • Twitter
    • Instagram

    Plastics News covers the business of the global plastics industry. We report news, gather data and deliver timely information that provides our readers with a competitive advantage.

    Contact Us

    1155 Gratiot Avenue
    Detroit MI 48207-2997

    Customer Service:
    877-320-1723

    Resources
    • About
    • Staff
    • Editorial Calendar
    • Media Kit
    • Data Store
    • Digital Edition
    • Custom Content
    • People
    • Contact
    • Careers
    • Sitemap
    Related Crain Publications
    • Sustainable Plastics
    • Rubber News
    • Tire Business
    • Urethanes Technology
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • News
      • Processor News
        • Injection Molding
        • Blow Molding
        • Film & Sheet
        • Pipe/Profile/Tubing
        • Rotomolding
        • Thermoforming
        • Recycling
      • Suppliers
        • Machinery
        • Materials
        • Molds/Tooling
        • Product news
        • Design
      • More News
        • K Show
        • Mergers & Acquisitions
        • Sustainability
        • Public Policy
        • Material Insights Videos
        • Numbers that Matter
      • Digital Edition
      • End Markets
        • Automotive
        • Packaging
        • Medical
        • Consumer Products
        • Construction
      • Special Reports
        • Processor of the Year
        • Best Places to Work
        • Women Breaking the Mold
        • Rising Stars
        • Diversity
        • Most Interesting Social Media Accounts in Plastics
      • Newsletters
      • Resin pricing news
      • Videos
    • Opinion
      • The Plastics Blog
      • Kickstart
      • One Good Resin
      • Pellets and Politics
      • All Things Data
      • Viewpoint
      • From Pillar to Post
      • Perspective
      • Mailbag
      • Fake Plastic Trees
    • Shop Floor
      • Blending
      • Compounding
      • Drying
      • Injection Molding
      • Purging
      • Robotics
      • Size Reduction
      • Structural Foam
      • Tooling
      • Training
    • Events
      • K Show Livestream
      • Plastics News Events
        • Plastics News Executive Forum
        • Injection Molding & Design Expo
        • Plastics News Caps & Closures
        • Women Breaking the Mold Networking Forum
        • Plastics in Automotive
      • Industry Events
      • Injection Molding & Design Expo
      • Livestreams/Webinars
        • PN Live: Mergers and Acquisitions
      • Editorial Livestreams
        • Polymer Points Live
        • Numbers that Matter Live
        • Plastics in Politics Live
        • Sustainable Plastics Live
      • Ask the Expert
      • Plastics News Events Library
        • Plastics Caps & Closures Library
        • Plastics in Healthcare Library
        • Women Breaking the Mold Networking Forum Library
      • Processor of the Year submissions
    • Rankings & Data
      • Injection Molders
      • Blow Molders
      • Film Sheet
      • Thermoformers
      • Pipe Profile Tubing
      • Rotomolders
      • Mold/Toolmakers
      • LSR Processors
      • Recyclers
      • Compounders - List
      • Association - List
      • Plastic Lumber - List
      • All
    • Directory
    • Resin Prices
      • Commodity TPs
        • Historic Commodity Thermoplastics
      • High Temp TPs
        • Historic High Temp Thermoplastics
      • ETPs
        • Historic Engineering Thermoplastics
      • Thermosets
        • Historic Thermosets
      • Recycled Plastics
        • Historic Recycled Plastics
    • Custom
      • Sponsored Content
      • LS Mtron Sponsored Content
      • Conair Sponsored Content
      • KraussMaffei Sponsored Content
      • ENGEL Sponsored Content
      • White Papers
      • Classifieds
        • Place an Ad
        • Sign up for Early Classified