Packaging to Grow Modestly in Early ’14, Faster in Second Half

The use of plastics packaging is closely tied to the production of consumer
goods. Therefore, if you follow the trends in consumer goods production you’ll get an indication of what is happening in the packaging industry.

To understand what will happen with consumer goods production, we start with real disposable income. The month-over-month rate of change in real disposable income has grown faster in each of the last three months. The current month-over-month rate of growth in real disposable income is 2%, which is the fastest growth since September 2011 (except for that of November and December 2012, which were artificially inflated by tax-law changes).

This means that real disposable income should be growing faster in upcoming months.
Changes in real disposable income tend to lead changes in real consumer spending by about six months. The month-over-month change in spending has been relatively flat since October 2012, and the annual rate of change has been growing more slowly. However, the trend in incomes indicates that there should be accelerating growth in consumer spending in the first and second quarters of 2014.

Changes in consumer spending tend to lead changes in consumer goods production (and therefore plastics packaging) by about three months on average. Since late 2011, consumer spending has been growing at a slower rate while production has been growing at a faster rate. It seems likely that the rate of growth in production will slow in the first part of 2014. But, the trends in income and spending seem to point to faster growth in production in the second half of 2014.

Therefore, the most likely scenario seems to be that plastics packaging will grow at a slower rate in the first half of 2014 and then at a modestly faster rate in the second half of 2014.
Of particular importance to many packaging processors is the food and beverage industry. The rate of growth in food and beverage production is slowing down rather rapidly. However, the leading indicators are pointing toward accelerating growth in food and beverage production in 2014. Packaging for the food and beverage industry should see faster growth throughout 2014.

About the Author

Steven Kline Jr. is part of the fourth-generation ownership team of Cincinnati-based Gardner Business Media, which is the publisher of Plastics Technology. He is currently the company’s director of market intelligence. Contact: (513) 527-8800; email: skline2@gardnerweb.com; blog: gardnerweb.com/economics/blog.