Economic Outlook

Staff -- Converting Magazine, 11/1/2001

The estimated dollar value of manufacturers' shipments of consumer nondurable goods increased 0.7% between July and Aug., following a 0.5% rise the month before. However, there was a 4.1% decline during June. Although most consumer market sectors have continued to expand even as business investment has plummeted, growth rates are at their lowest level since the last recession ended more than a decade ago. Despite the recent bounce-back, the estimated value of Aug. 01 consumer nondurable shipments was still 0.5% below the total for Aug. 00. The value of food products shipped rose by a modest 0.6% between July and Aug., following a 1.1% increase the month before.--a dramatic fall from the 12.9% expansion between 99 and 00.

Converting's exclusive packaged goods price index (PGPI) rose a surprising 0.3% between July and Aug., following a like decline the month before. Our composite index stood 1.6% higher this Aug. than in Aug. 00. Average prices for 11 of the 16 components that make up the composite PGPI measure increased over the month, another three declined, and two groups showed no price movement, on average, between July and Aug. Between August 00 and August 01, average prices increased for 12 of the 16 PGPI index components. As the economy works its way through what appears to be a full-blown recession, we're likely to see inflationary pressures for nondurable consumer products ease gradually through Q1 02.

End-Market Indicators

	Actual 2000	Q1/01	Q2/01	Q3/01*	Q4/01*
Manufacturers' Shipments (in billions of dollars)	% Change from Year-Ago
All Food Products	438.5	4.7	3.9	4.9	4.1
Meat, Poultry, Fish	129.2	7.3	6.2	4.6	3.9
Beverages	65.1	3.2	3.3	5.2	4.2
Dairy Products	60.9	6.0	9.2	12.3	8.5
Pharmaceuticals & Medicines	121.8	10.8	-2.1	-5.5	2.3
All Consumer Nondurables	1,117.7	3.5	1.5	-0.7	-1.3
Retail Sales	(in billions of dollars)
All Retail Stores	3388.2	2.2	3.9	3.1	2.0
Grocery Stores	421.9	4.2	2.5	2.3	1.9
Eating & Drinking Places	306.1	4.3	5.2	6.0	4.1
Pharmacies & Drug Stores	134.4	11.7	10.2	9.8	8.2
* Forecast Source: U.S. Department of Commerce

Behind The Numbers

Growth in converting product end-markets was solid through the first two-thirds of this year. But it was clear from a number of signs that gains would be smaller in Q3 and Q4 than during the first half of 01.( At press time, we only had July and Aug. preliminary numbers.) The fallout from the September 11^th terrorist attacks will depress consumer spending of all sorts the balance of this year. Nevertheless, consumer markets outpace the decline in most business-spending-specific markets. Slowing U.S. growth was apparent in sales trends for food-related retail sectors. Grocery store sales increased only 3.3% for the year ending this Aug., after rising by 5.3% between 99 and 00. And sales at eating and drinking places slowed to 5.3% annualized growth during the first two-thirds of this year after increasing 6.9% during full-year 00. Higher unemployment, lower consumer confidence, and slower income growth—all problems even before the events of 9/11/01—will limit gains in consumer shipments and retail sales.