March 11, 2015
According to PMMI’s Quarterly Economic Outlook, the US is in the early stages of a mild recovery. The Industrial Production Index reached a low point in October, ending its worst economic downturn since 1946. Most industries are showing increasing activity and the rate of decline is slowing in others. The same holds true for the markets that impact the packaging and processing industries.
While 2009 was a year of recession, 2010 is bringing signs of recovery. Markets with positive outlooks include: Pharmaceutical & Medical Devices Production; Personal Care Products Production; Beverages, Coffee & Tea Production; Chemical and Cleaning & Finishing Products, Household and Industrial; Consumer/Commercial Industrial Durables, Hardgoods, Components and Parts; Food and Foods Preparation Production.
The US Leading Indicator Index has posted its 10th straight month of rise, taking it to a record high. The year-over-year reading is above 0 and the rise in the index supports the outlook for increasing activity in the US economy in 2010.
The ISM Purchasing Managers Index reached a five-year peak of 58.4 in January and has grown to 59.6 in March (Wall Street Journal), a positive signal for the overall economy in 2010. January was the indicator’s sixth consecutive month above 50, indicating six months of manufacturing sector expansion.
Retail Sales (not including automobiles) are showing signs of stabilizing. Although sales dropped 3.0 percent overall in 2009, holiday spending saw its first year-over-year increase (0.4 percent) since 2006. A mild November to December rise shows that the retail sector is still weak, but that the worst of the decline is probably over.
If the downward trend continues in Corporate Bond Prices, it tells us that long-term interest rates may become problematic for the economy as early as 2011.
The exception to the economic recovery trend in 2010 is nonresidential construction. This market is set to move lower through 2010, but as a generally lagging indicator, that is normal. The companies with the most exposure to the nonresidential construction sector will have a difficult time increasing production levels in 2010. This has been factored into our forecast for a flat year in Consumer/Commercial Industrial Durables, Hardgoods, Components and Parts.
Overall, the macroeconomic outlook is positive for 2010. Unemployment at about 10 percent will dampen consumer confidence, but the leading indicators support recovery.
KEY FACTORS FOR THE PACKAGING INDUSTRY
PMMI machine shipmentsTotal US Packaging Machinery Shipments to US Industrial Production
Total US Packaging Machinery Shipments continued to move lower along with the greater economy throughout 2008. US Industrial Production is currently 8.8 percent below the year-ago level but has transitioned into a sustainable recovery trend since the close of 2009. As US Industrial Production continues to improve in 2010, US Packaging Machinery Shipments will also likely see some advancement from 2009 levels.
PMMI machine shipments productionUS Packaging Machinery Shipments to Nondefense Capital Goods New Orders
US Packaging Machinery Shipments shows strong cyclical identity to Nondefense Capital Goods New Orders (12/12), which is transitioning into Phase A, Recovery. This suggests US Packaging Machinery Shipments will see improving economic conditions in 2010.
PMMI exportsPackaging Machinery Exports to Dollar Exchange Rate (vs. Euro)
US Packaging Machinery Exports has a clear inverse relationship to the strength of the dollar. Recent financial problems in certain European countries have given the dollar a boost against the Euro. We expect the dollar strengthening trend to continue in 2010. While a strengthening dollar is not favorable news for Packaging Machinery Exports, the economic recovery taking place in many overseas markets should help compensate for some export losses caused by dollar appreciation.
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