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6/28/2017 | 2 MINUTE READ

Economic Data, Wall Street Forecasts Point to Packaging Growth

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Food/beverage spending and three underlying “macro” trends explain why.

Since our last report on the packaging industry in January, real spending on food and beverages (F&B) has increased by 4% from a year ago. F&B is key driver of the packaging business. In addition, Gardner Business Intelligence (GBI) has identified several underlying macroeconomic trends that will continue to drive demand in the packaging industry in the near-to-medium future.

Housing Market: The housing market is exhibiting strong growth, as measured by the volume of new home sales. In housing, generally two types of homes are tracked: Those priced below $300,000 are considered first-time or “starter” homes, while those above $300,000 are loosely identified as luxury homes. The starter home market is showing growth after being flat or in a declining state between 2013 and 2015. At the end of the first quarter of 2017, the number of new homes priced between $150,000 and $200,000 had grown by more than 8%, while those homes between $200,000 and $250,000 grew by more than 10% (all percentage figures are calculated using a 12/12 rate-of-change calculation technique, unless otherwise stated). As new households are formed they will drive demand for packaged goods.

Job Creation: The unemployment rate continues to move lower, maintaining its multi-year downward trend. Interestingly, starting with the January 2017 jobs report, the rate of change actually progressed faster. This is clearly shown by the broadest measure of unemployment, called the “U-6” rate, which fell from 9.4% in January 2017 to 8.4% in the May jobs report. This rate of decline is considerably faster than the trend set in prior years. The low unemployment situation has begun to put pressure on wages, with wages growing at or above 2% in real (inflation-adjusted) terms. While not fully representative of the entire economy, small-business survey data has shown a definitive transition, as firms that were expecting to have to pay higher wages in the future are reporting that those increases have now become a reality.

Equity Forecasts: One of the new tools that GBI has begun utilizing is U.S. equity markets data, including two-year forecast information from equities analysts. These data allow GBI to provide insights regarding Wall Street’s expectations for the large publicly traded firms in a variety of industries. GBI’s analysis of these individual corporate forecasts allows it to develop industry composite forecasts. The GBI containers and pack- aging composite forecast based on Wall Street data indicates improving growth in both 2017 and 2018, with year-end 2018 revenue growth of 5.3%.

ABOUT THE AUTHOR: Michael Guckes is the chief economist for Gardner Business Intelligence. He has been performing modeling and forecasting work since 2004, when he was an economist for the state of Ohio. His econometric work was used to make markets more efficient and to guide state legislation. He received his BA in Political Science and Economics from Kenyon College and MBA from The Ohio State University. Contact (513) 527-8800; mguckes@gardnerweb.com; gardnerweb.com


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