Economic Outlook

Staff -- Converting Magazine, 1/1/2002

The estimated dollar value of manufacturers' shipments of consumer nondurable goods fell by a negligible 0.1% (on a seasonally-adjusted basis) between Sept. and Oct. 01, following a plunge of 2.4% the month before. The dollar value of consumer nondurable goods shipped through the first 10 months of last year was 0.6% greater than during Jan-Oct. 00. Final numbers for 01 will likely show little, if any, growth in the value of consumer nondurables shipped when compared to the total for 00. But, after the 9.8% gain realized between 99 and 00, dollar shipments during 01 were still at a very healthy level, historically. Nevertheless, the value of Oct. 01 consumer nondurable shipments was 2.6% below the total for the same month of 00, so the market had clearly lost all momentum during the second half of last year. The value of food products shipped rose 0.4% between Sept. and Oct., following a steep 1.7% decline the month before. And the value of pharmaceuticals/medicines shipped increased 1.5% during Oct., after posting a loss of 2.2% between Aug. and Sept.

Converting's exclusive packaged goods price index (PGPI) rose by a modest 0.2% between Sept. and Oct., following a steep 0.4% decline the month before. Our composite index stood 1.2% higher in Oct. 01 than during Oct. 00. Although average prices for 11 of the 16 components that make up the PGPI increased over the month, all were moderate. The sharpest over-the-month price increase was in the confectionery products group, where the inflation index moved up 0.8%. Also rising by 0.3%-0.4% between Sept. and Oct. were the price indexes for alcoholic beverages, cosmetics, bakery products, processed fruits and vegetables, and household appliances. But average prices dropped for shortening/cooking oils (-1.7%), soft drinks (-0.5%), and over-the-counter pharmaceutical products (-0.2%). Between Oct. 00 and Oct. 01, average prices increased for 12 of the 16 PGPI index components. With the nation now officially in a recession, there's little doubt that inflationary pressures will continue to ease, at least through the first half of 02.

Paper Packaging Product Transaction Prices

	SEPT. 2001	Q2/01	Q3/01	Q4/01	*Q1/02*
Diffusion Index (% Increasing)	37.5	32.4	32.6	36.9	43.5
Transaction Prices ($/ton; % change from year ago)
Unbleached kraft - Grocery sack (70 lb.)	490	-4.5	-5.8	-5.2	-5.9
Unbleached kraft - Shipping sack (50 lb.)	710	-0.9	-3.6	-5.4	-5.0
Bleached kraft - Folding carton	820	-3.5	-5.4	-6.9	-6.8
Corrugating medium - Semichemical (26 lb.)	360	-8.8	-12.8	-17.9	-12.7
Recycled boxboard - Chipboard rolls	420	-3.7	-6.7	-5.6	-6.8
Recycled boxboard -Clay-coated rolls	570	-3.4	-3.4	-4.2	-3.3
* Forecast Value Source: Purchasing magazine

Behind The Numbers

Average prices for paper packaging products and materials moved lower between Q2 and Q3 of 01. Prices have been trending steadily downward for the past 12-15 months as slowing economic growth and ample worldwide capacity has made it nearly impossible for packaging manufacturers to make even the smallest price increase "stick". By Q3 01, average prices for the paper packaging products that we follow had fallen anywhere from 3%-15% from their Sept. 00 levels. The Purchasing magazine monthly diffusion index of paper product prices was little changed between Q2 and Q3 01. Also, it remained well below the "break-even" reading of 50. The current low reading signals that inflationary pressures will continue low-to-nonexistent through at least Q1 02. Even with the economic recovery expected to be well-established by the end of 02, average prices for paper packaging should be less than 3% higher this year than in 01.