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.