Scoring Boxes
Manufacturing Is in a Sweet Spot BY DICK STORAT
T
4
BOXSCORE May/June 2021
Purchasing Managers’ Index
70
Above 50 shows manufacturing expansion
65 60 55 50 45 40
Below 50 shows manufacturing contraction Below 42.7 shows economic recession
35 30
08
09
10
11
12
13
14
15
16
17
18
19
20
21
Source: Institute for Supply Management
Industrial Production Nondurable Consumer Goods
104
3.0%
102
2.5%
100
Index (2012 = 100)
here is no question that the coronavirus pandemic has upended the U.S. economy. COVID-19 triggered the fastest recession in U.S. history. Although the nation has clawed most of its way back from the worst effects of the pandemic, the economy remains splintered, with big winners and losers. The pandemic and the home-oriented economy it fostered have been a boon for e-commerce and the more intensive corrugated and other paper packaging it needs to get goods safely through that retail channel to consumers. Nonstore retail sales have risen by 28% from pre-pandemic levels. But soaring e-commerce hasn’t been the only benefit for corrugated packaging demand. After tumbling during the initial virus lockdown last year, spending for goods recovered rapidly, in part because of generous federal fiscal policy. On the other hand, spending on services also dropped, but it never recovered, as many serviceoriented businesses such as restaurants, travel and lodging, and theaters either shut down entirely or operated at substantially reduced capacity to comply with social distancing requirements. Corrugated boxes go into the packaging of goods, which saw an upturn, and less into the services sector, which turned down. With year-end stimulus checks and extended unemployment benefits in consumers’ hands, retail sales of goods soared in March with overall growth of 9.8%. Several categories important to demand for corrugated packaging led the growth. Nonstore retail sales (almost entirely online sales) soared by 29% in January, while building materials supply stores posted a 19% gain in sales from
2.0%
98 96
1.5%
94
1.0%
92 0.5%
90 88
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 2019
2020
2021
0.0%
Percent Change Year-to-Date
Source: U.S. Census
year-ago levels. Food sales made up for a lackluster year-end showing by rising 12% ahead of previous January’s sales. U.S. manufacturing is benefiting from that increased spending, which has continued through the first quarter at a strong level. The Institute for Supply Management’s monthly purchasing managers’ index is one of the most closely
watched indicators of manufacturing activity. The top chart above shows that manufacturing activity has been expanding ever since it fell so dramatically last April. Since then, the sector has been expanding for nine consecutive months, reaching its broadest expansion in three years in February. New orders, production, hiring, and exports all showed
