Economic Outlook
Staff -- Converting Magazine, 1/1/2001
Manufacturers' shipments of nondurable goods increased 0.1% between Sept. and Oct., following a 0.5% decrease the month before. However, the value of new orders declined 0.2% during Oct., following a 0.3% loss the month before, and is likely to remain flat in coming months. The estimated value of Oct. 00 nondurables was 4.7% above Oct. 99, while the over-the-year-gain in orders was 4.3%. Food product shipments were 1.9% ahead of the same period in 99. Beverage shipments were ahead 5.4% annualized. However, dairy product shipments plunged 1.9% between Sept. and Oct. 00, and were more than 3% lower through Oct. 00 than in 99. Shipments of drugs, soaps and toiletries, however, were 9.7% over 99. The economy has slowed and prices are rising more slowly. Shipments value growth should ease through mid-2001, but remain positive.
Converting's exclusive packaged goods price index (PGPI) was up a surprisingly strong 0.4% between Oct. and Nov., following just a 0.1% increase the month before. Average prices for 12 of 16 components in the PGPI increased last month, 3 declined, and one was flat. OTC pharmaceutical prices fell 0.6%. However, these declines were more than offset by over-the-year increases for seven product groups: household glassware (+1.0%), soaps and detergents (+0.8%), household appliances (+0.8%), sanitary paper products (+0.7%), alcoholic beverages (+0.6%), processed fruits & vegetables (+0.5%), and floor coverings (+0.5%). The overall PGPI rose a moderate 2.2% over the past year. With a slower economy and more stable energy prices, we expect increases in the PGPI to ease early in 01, and overall inflation to be marginally lower in 2001 than in the past two years.
Sept. 00 | Q2/00 | Q3/00 | Q4/00* | Q1/01* | |
|---|---|---|---|---|---|
Diffusion Index (% Increasing) | 50.0 | 55.6 | 50.9 | 48.5 | 43.1 |
Transaction Prices ($/ton; % change from year ago) | |||||
Unbleached kraft-Grocery sack (70 lb.) | 520 | 13.0 | 11.4 | 10.6 | 6.4 |
Unbleached kraft-Shipping sack (50 lb.) | 730 | 11.4 | 7.9 | 5.8 | 3.5 |
Bleached kraft-Folding carton | 860 | 20.0 | 10.3 | 4.9 | 1.1 |
Corrugating medium-Semichemical (26 lb.) | 435 | 29.2 | 14.5 | 14.5 | 1.9 |
Recycled boxboard-Chipboard rolls | 450 | 21.6 | 11.6 | 7.1 | 2.4 |
Recycled boxboard-Clay-coated rolls | 590 | 25.5 | 13.5 | 9.3 | 0.6 |
* Denotes forecast
Source: Purchasing magazine
Behind The Numbers
The Purchasing magazine monthly diffusion index of paper product prices fell almost five points between Q2 and Q3 00. Paper prices rose sharply during the second half of 99 and through the first third of 00, but have stabilized over the last two quarters. At an index level of 50.9 during Q3 00 (a diffusion index of more than "50" represents, on average, escalating prices), the index was more than 25% lower than the 68.6 average for Q3 99. This doesn't mean that paper prices have declined absolutely during the past year, since the index measures only the relative direction and magnitude of price movements. But it does provide evidence that inflationary pressures are subsiding, and that supply and demand for converting paper grades were in good balance in the final months of 00. If prices hold steady over Q4 00, average paper costs for the year as a whole will have risen by about 13% above the full-year 99 level, representing a substantial additional expense that had to be either absorbed or passed along by the converting manufacturer. The good news: there's every reason to expect that converting paper price increases will average less than 5% next year.
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