5 minute read
SCORING BOXES
BY DICK STORAT
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Shifting consumer patterns in response to the coronavirus pandemic have been at the center of strong paper packaging markets since the pandemic’s beginning. Consumption of packagingintensive nondurable goods has risen, providing packaging suppliers with expanding market opportunities. As the top chart at right depicts, inflation-adjusted consumer spending for nondurable goods surged as the pandemic led to travel lockdowns and recovered rapidly as the pandemic continued. Through November, spending for these goods had risen by 2.6%.
Yet, while consumption of food and other fast-moving goods has grown, domestic production has not kept pace. Most of the initial surge of demand for pantry and paper goods came from existing stocks, and the subsequent recovery in domestic production of these goods was much more muted than the recovery of spending.
As the middle chart at right shows, production sank during March and April and recovered only slowly thereafter. Domestic production of nondurable goods has yet to rise above prior year levels. And at the end of November, monthly production was declining, and production had declined by 2.8%.
That left a spread of more than five percentage points between consumption and production. Imports supplied the additional nondurable goods that were consumed but not made in the United States.
To get some perspective on the impact of international trade on paper packaging markets, we identified the commodities in international trade that required protective paper packaging. The table at right summarizes international trade
Real Consumer Spending for Nondurable Goods 250 4.0% 240
Index (2009 = 100)
230 220 210 200 190 180 170 160 150
Source: BEA
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
2018 2019 2020 Percent Change Year-to-Date 3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
Industrial Production Nondurable Consumer Goods
106 1.0%
104
102
Index (2012 = 100)
100
98
96
94
92
90
88
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Source: U.S. Census
2018 2019 2020 Percent Change Year-to-Date 0.5% 0.0% -0.5% -1.0% -1.5% -2.0% -2.5% -3.0% -3.5% -4.0%
Packageable Goods Trade Deficit ($ Billions Over 11 Months, 2020)
PACKAGEABLE COMMODITY EXPORTS IMPORTS TRADE DEFICIT
Computers & Electronic Equipment $175 $342 $167 Textiles & Apparel 18 136 118 Pharmaceuticals & Medicines 62 154 92 Appliances 8 31 23 Food & Beverage 68 91 23 Fruits, Vegetables & Tree Nuts 16 29 13 Cleaning & Toilet Supplies 16 13 (3) Other Packageable Goods 66 131 65
TOTAL LIABILITIES & NET ASSETS $429 $926 $497
for packageable goods during the first 11 months of 2020.
During that time frame, exports of packageable goods amounted to $429 billion and provided demand for paper packaging. On the other hand, imports of packageable goods amounted to more than twice as much—$926 billion—and represented lost opportunities for U.S. producers of paper packaging.
Foods, including fresh produce, do not have the largest trade deficits. The dubious honors of having the largest trade deficits go to electrical equipment, clothing, and pharmaceutical goods, not to foods, beverages, and fresh produce. However, the markets for these packaging-intensive edibles have still racked up a combined trade deficit of $36 billion through this past November.
The top chart at right plots the monthly exports of these packageable goods. The three-month precipitous decline in exports reduced their value to 10% below the prior year’s shipments abroad. Although there has been some recovery from the initial decline, it has not been enough to get even close to prior year exports. At the end of November, packageable goods exports were down by 8.6%. Exports of these goods totaled $470 billion for the first 11 months in 2019, but they were only $430 billion in 11 months of 2020, a decline of $40 billion. That represents $40 billion of lost market opportunity for domestic producers of corrugated and other paper packaging.
The situation with imports of packageable goods is equally distressing. The bottom chart at right shows the trend of imports of packageable goods since 2018. Imports suffered just as exports did when international trade patterns were initially disrupted by the pandemic. However, the recovery of imports has been substantially more robust than for exports. For the past three months, imports have exceeded prior year levels by a significant amount. Through the first 11 months of 2020, imports were off by only 0.7% from 2019’s shipments abroad.
Through the first 11 months of 2020, imports of packageable goods amounted to $926 billion, close to their $933 billion at the end of November 2019.
Both imports and exports impact U.S. packaging markets, and the most comprehensive way to look at their overall impact is to look at the trade deficit, which is the excess of imports over exports. The chart on page 8 shows what the trade deficit for packageable goods looks like since 2018. Beginning in June 2020 and continuing for every month since then, the trade deficit has grown by leaps and bounds compared to its year-earlier level. By November, the trade deficit had expanded by 7.2%. In November 2019, the trade deficit amounted to $463 billion. But, by November 2020, the deficit had increased by $33 billion to a total of $496 billion.
While the trends toward rapidly rising online purchases and more stay-at-home meals have provided opportunities for paper packaging producers, the increasing trade deficit for packageable goods has
($ Billions/Month)
$50 $45 $40 $35 $30 $25 $20 $15 $10
U.S. Packageable Exports
$5 $0
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
2018 2019 2020 Percent Change Year-to-Date
Source: Census Bureau, RSA, Inc.
0.0% -1.0% -2.0% -3.0% -4.0% -5.0% -6.0% -7.0% -8.0% -9.0% -10.0% -11.0% -12.0%
($ Billions/Month)
$110 $100 $90 $80 $70 $60 $50 $40 $30 $20
U.S. Packageable Imports
$10 $0
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
2018 2019 2020 Percent Change Year-to-Date
Source: Census Bureau, RSA, Inc.
0% -1% -2% -3% -4% -5% -6% -7% -8% -9%
resulted in a significant share of that market growth being siphoned off to imports rather than to the packaging of domestically made goods.
Dealing with the economic impact of the coronavirus pandemic may be garnering the headlines these days, but the impact of the country’s growing trade deficit for packageable products is being felt in the marketplace by corrugated and other paper packaging converters every day.
Dick Storat is president of Richard Storat & Associates. He can be reached at 610-282-6033 or storatre@aol.com.
($ Billions/Month)
$60 $55 $50 $45 $40 $35 $30 $25 $20 $15 $10 $5
U.S. Packageable Goods Trade De cit
$0
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
2018 2019 2020 Percent Change Year-to-Date
Source: Census Bureau, RSA, Inc.
8% 7% 6% 5% 4% 3% 2% 1% 0% -1% -2% -3% -4% -5% -6% -7%
