NTMA
Published

Packaging Demand Has Probably Peaked

Consumers are spending less on food and beverage consumption.

Share

The use of plastics packaging is closely tied to production of consumer goods and the food and beverage processing industry. Trends in the economic data that are leading indicators for production in these two industries provide clues as to what will happen to demand for plastics packaging.

Real disposable income is the earliest leading indicator we track for both industries. Disposable income hit all-time highs in recent months. Recently released data even revised upward the level of disposable income reported for the first quarter of 2015. Over the last five months, the one-month rate of change in disposable income has grown faster than the historical average. The annual rate of change shows that disposable income has grown at a rapidly accelerating rate since January 2014. 

Yet the accelerating growth in consumer income has not resulted in increased spending. Consumer-goods spending dipped below its average one-month rate of growth in April. And while the annual rate of growth has accelerated, it has not increased as much as expected. This is likely because spending remained robust in 2013 and 2014, even as disposable income saw significantly slower growth. Because consumer-goods spending stayed high with such slow growth in incomes, don’t expect to see accelerating growth in consumer-goods spending, even if disposable income continues to grow faster.

Since 2014, food and beverage consumer spending has moved in the opposite direction of incomes. In fact, food and beverage spending has contracted at an accelerating rate throughout 2015. It’s quite a rare occurrence for food and beverage spending to contract. But historical data shows that disposable income leads food and beverage spending by six to 12 months. So we should see food and beverage spending contract at a slower rate very soon and then perhaps move into accelerating growth in the second half of 2015.

So, the future trend in food and beverage spending seems to be more positive than in consumer-goods spending. Spending tends to lead production by up to six months. Consumer-goods production has seen decelerating growth over the last six months. This is surprising, given the trend in consumer-goods spending. It’s possible that we could see some growth in production of consumer goods. The more likely scenario is that the rate of growth in production will remain relatively unchanged. So packaging demand will probably remain relatively stable in future months.

Despite the contraction in food and beverage spending, production has seen rapidly accelerating growth. Still, I don’t think we will see corresponding growth in production, at least until spending and production come into a better balance. This means we could be entering a period of relatively weaker demand for packaging in the food and beverage industry.

Consumers are getting fatigued despite the increase in their incomes. So look for consumer spending to be relatively soft. This means that demand for packaging likely peaked at the end of the first quarter of 2015.

IMTS+
NTMA
NTMA
MMS Online Apr-2021
Become a NTMA member today!
chemical foaming agents for molding and extrusion
Best of the Best
Resinworks with Optimizer
TD-Series Desiccant Dryers
Shibaura Machine Industrial IoT machiNetCloud
Thinswitch confirms ejector plate return
New 2024 Twin Screw Report

Related Content

Packaging

In Sustainable Packaging, the Word is ‘Monomaterial’

In both flexible and rigid packaging, the trend is to replace multimaterial laminates, coextrusions and “composites” with single-material structures, usually based on PE or PP. Nonpackaging applications are following suit.

Read More
plant tour

US Merchants Makes its Mark in Injection Molding

In less than a decade in injection molding, US Merchants has acquired hundreds of machines spread across facilities in California, Texas, Virginia and Arizona, with even more growth coming.

Read More
dies

Medical Tubing: Use Simulation to Troubleshoot, Optimize Processing & Dies

Extrusion simulations can be useful in anticipating issues and running “what-if” scenarios to size extruders and design dies for extrusion projects. It should be used at early stages of any project to avoid trial and error and remaking tooling.  

Read More
Automation

What to Look for in High-Speed Automation for Pipette Production

Automation is a must-have for molders of pipettes. Make sure your supplier provides assurances of throughput and output, manpower utilization, floor space consumption and payback period.    

Read More

Read Next

sustainability

Lead the Conversation, Change the Conversation

Coverage of single-use plastics can be both misleading and demoralizing. Here are 10 tips for changing the perception of the plastics industry at your company and in your community.

Read More
NPE

Beyond Prototypes: 8 Ways the Plastics Industry Is Using 3D Printing

Plastics processors are finding applications for 3D printing around the plant and across the supply chain. Here are 8 examples to look for at NPE2024.

Read More
sustainability

For PLASTICS' CEO Seaholm, NPE to Shine Light on Sustainability Successes

With advocacy, communication and sustainability as three main pillars, Seaholm leads a trade association to NPE that ‘is more active today than we have ever been.’    

Read More
IMTS+