Economic Outlook

Staff -- Converting Magazine, 2/1/2002

The estimated dollar value of manufacturers' shipments of consumer nondurable goods fell 1.7% between Oct. and Nov. 01, following a slight 0.2% increase the month before. Combined with the 2.4% plunge in shipments during Sept., the Nov. decline showed a very weak market for consumer products in the final third of 01. Final numbers for 01 will likely show little growth in consumer nondurables shipped when compared to the total for 00. But, coming on the heels of the extraordinary 9.8% gain realized between 99 and 00, this means that dollar shipments during 01 were still reasonably healthy. Nevertheless, the estimated value of November 01 consumer nondurable shipments was 5% below the same month of 00, so the market was losing momentum in the final weeks of 01. The value of food products shipped rose 0.1% between Oct. and Nov., following a solid 1.0% rise the month before.

Converting's exclusive packaged goods price index (PGPI) was unchanged between Oct. and Nov., following a modest 0.2% increase the month before. It stood just 1.1% higher in Nov. 01 than in Nov. 00. Average prices for 7 of the 16 PGPI components increased over the month, five declined, and four were unchanged. Between Nov. 00 and Nov. 01, average prices increased for 11 of the 16 PGPI index components. The sharpest rises in average prices were the 3.0% gain recorded by the alcoholic beverages category, the 2.8% rise in average soft drink prices, and the 2.6% increase in the price of bakery products. Price indexes for household flatware (-3.2%), appliances (-1.3%), floor coverings (-1.1%), shortening/cooking oils (-0.5%), and cosmetics (0.1%) all declined between Nov. 00 and Nov. 01. With the nation slowly pulling out of recession, inflationary pressures will continue to ease, at least through the first half of 02.

Plastics Transaction Prices

	DEC. 2001	Q3/01	Q4/01	Q1/02*	Q2/02*
Transaction Prices (cents per pound; % change from year ago)
HDPE - film grade	39.0	-18.9	-21.7	-19.6	-14.3
LDPE - liner grade	41.0	-4.9	-11.7	-16.0	-12.0
PET - bottle grade	63.0	9.4	2.7	-1.6	-2.9
LLDPE — general purpose	40.0	-16.7	-17.3	-12.8	-9.6
LLDPE — film grade	38.0	-12.1	-15.7	-15.3	-9.1
Polystyrene — general purpose	48.0	-19.5	-16.6	-8.3	-7.1
PVC — general purpose	33.0	-17.0	-23.7	-21.6	-23.4
* Denotes forecast Source: Purchasing magazine

Behind The Numbers

Prices paid for the wide variety of plastics materials used in packaging products were broadly lower during 01 than in 00. Ample worldwide production capacity, lower prices for input commodities (particularly petroleum-based resins), and weakening global demand combined to undermine the pricing power of plastics manufacturers. These conditions should prevail through most of 2002, as well, so some additional price declines are likely during the first half of 02 before the recovery and stronger demand firms prices by late summer/ early fall. All seven product groups saw prices decline between Oct. and Nov. of 01. This probably represented the "bottom" of this downward price cycle, however, since prices during Dec. fell further for only four product categories, while holding steady for three others. But with demand still weakening over the closing months of 01, no plastics product category posted an increase in prices during Q4 01. And it's likely that none will, until it's clear that the current economic recession is nearing an end.