Trends in consumer nondurables at the supply (manufacturer) source are showing signs of an economic turnaround (See "Economic Outlook" p. 76). But we can also look at what's actually being purchased in the marketplace as a measure of growing consumer demand for packaged, nondurable goods, and consequently, the converted packaging that goes with them.

Overall retail sales in the United States grew at a subdued rate of just 3.4 percent (before inflation adjustment) between 2000 and 2001, following a much healthier gain of 7.6 percent in 1999-2000. Growth in the value of retail sales at pharmacies/drug stores was just as strong last year as during 2000—which is to say, very strong. Following growth of 9.7 percent during 2000, U.S. Commerce Dept. preliminary sales numbers for 2001 show a gain of another 9.9 percent—even though the value of shipments from U.S. pharmaceutical/medicine makers declined over the year. The increased diversity of product offerings at drug stores has allowed these retail outlets to outperform almost all other sectors of the market.

The recession was more apparent, however, in sales trends for the food-related retail sectors—although, even here, the numbers weren't all that bad. Grocery store sales increased at only a 3 percent annual rate last year, after rising by 5.3 percent between 1999 and 2000. And sales at eating and drinking places slowed to 4.7 percent growth during 2001 after expanding by 6.9 percent the previous two years.

Although the 2002 consumer sector began in a weaker position than during the early months of 2001, there are some hopeful signs that most consumer markets have reached bottom, and that conditions will improve as we move through 2002. Overall retail sales during the third quarter of 2001 were only 2 percent above the comparable July-September period the year before. During the final quarter of last year, though, sales were 5.2 percent better than over the final three months of 2000.

Grocery store sales in October-December 2001 were 2.9 percent greater than during the same three months a year earlier, and sales at eating/drinking places expanded at a 4.8 percent annual rate during the final three months of last year. This is moderately stronger than the 4.4 percent annualized gain during the previous quarter.

On balance, there's reason to believe that growth in converting end-markets will pick up by late spring/early summer 2002. Consequently, manufacturer shipments and retail sales growth this year will likely be at least as good as—and probably slightly better than—during 2001. And gains will almost surely accelerate as we move into 2003.