This time, we might have it right. Via a broad range of statistics analyzed with the help of Reed Research Group, Newton, MA, it appears that 2004 is the year we turn the economic corner toward real, lasting growth.

Unlike the weak US economic upturn that fizzled out in early 2002, today's current recovery is supported by both lean inventories and coordinated economic rebounds in major export markets. Tax cuts and cheap credit fueled the initial spending gains last year, but now employment, income, investment and exports are expanding. For the first time in three years, consumption spending, business investment and the foreign trade sector are all contributing to economic growth.

Converted paper production tracks nearly lockstep with industrial production, so expect this segment to expand quickly over 2004, Reed Research says. Still, the rebound here will be weaker relative to overall US GDP than in previous business expansions because US manufacturing will still be losing world market share for much of 2004 from the 50 percent appreciation of the dollar in the late 1990s. Sixty percent of that loss of international price competitiveness has now reversed, mostly during 2003. Consequently, expect manufacturing and related packaging to be recovering market share by late this year or early next.

The pickup in converted paper-production volume at the end of 2003 and throughout 2004 is being driven by the abrupt recovery of the "goods" portion of GDP. Goods purchases always rise faster than service purchases at the beginning of an economic expansion period. Goods purchases increased at a 12-percent annual pace last summer—as much as in the five previous quarters combined. This level of activity was maintained with a further small gain at the end of 2003. The growth in industrial production was more modest because imports rose substantially. The growth pace for goods is expected to average 5-6 percent through the end of 2004. By contrast, goods purchases rose only 2.7 percent in 2002.

There is enough surplus converting capacity that a 3.1-pecent gain in converted-paper production in 2004 will not put widespread pressure on available capacity, Reed Research forecasts. Investment in converting, film-making and printing equipment will rise a bit as idle capacity is restarted this year and expand much more quickly in 2005. This outlook is similar to other industrial markers excluding electronics and motor vehicles.

Total US industrial equipment investment has been steady for two years—but steady at the 1998 level, which was 12 percent below the early 2001 peak. Prepare for a 2-3 percent increase in capital-equipment investment this year and then a further 5-7 percent rise in 2005.

Across both the consumer-product company and converter surveys conducted by New York-based TrendWatch Graphic Arts last year, the prevailing path for investment is clearly one meant for higher productivity. Rather than looking to expand into new markets, new packaging forms or new applications, converters are eyeing a boost in internal efficiency, especially via prepress. Thirty-six percent of respondents plan investments in computer-to-plate (24 percent in flexo CTP; 16 percent in offset CTP). About 15 percent say they're planning a digital-printing system purchase.

Pulp prices, including softwood pulp kraft, increased $15/ton in October 2003 with a further $15-20/ton rise expected by the end of 2004—still $150/ton below the early 2001 peak prices in the last expansion. Shuttered mills and the ongoing transfer of advertising from ink to pixels will restrain price increases in spite of a surge in packaging demand, Reed Research says.

Linerboard prices were steady in late 2003 at about $50/ton below 2002 and early 2003, but that decline is expected to be reversed over 2004. Packaging-related paper demand will re-bound quicker and more strongly than printing-paper demand.

Resin prices began 2004 about 15-20 percent above a year earlier with a further 5-10 percent rise anticipated by the end of this year. Last years' price increase was mostly due to higher crude oil prices reflecting both heightened political tensions in the Middle East and a stronger world economy.

Demand will expand more quickly in 2004 in a more mature business expansion but this will be partially offset by slightly lower oil prices resulting from easing political tensions, expanded Iraqi oil exports and normal (always the forecast) winter weather.

The TrendWatch Graphic Arts' studies, "Packaging 2003: Directional Trends Reports," are available for purchase. More info: www.trendwatchgraphicarts.com/reports_2003/pack2cm.html