July 7, 2023
Year in and year out, one thing has remained constant: Some three-quarters of U.S. box shipments have always gone to package nondurable goods. These fast-moving goods, assumed to be consumed within three years, provide the core destination for some 3 billion square feet of products made in the industry’s corrugated box plants.
By and large, the growing demand for these goods is driven by population growth and rising disposable incomes. A considerable share of these products is imported into the U.S., the largest goods-consuming country on the planet. When imports of these goods outpace exports as they have for decades, the domestic production of nondurable goods grows even more slowly than domestic consumption.
The top chart shows the indexed value of industrial production of nondurable consumer goods. True to its trend, only sluggish growth in output was achieved during the first quarter of this year. Through March, production rose by less than 0.4%. This past year’s growth was a little faster, growing 1.7%.
Nondurable consumer goods account for 21% of the nation’s industrial production. The food and tobacco industries are the largest single group in that category, accounting for 44% of nondurable goods production.
The bottom chart shows domestic food production for the recent past. This past year, food production grew by 1.8%, within its long-term growth range. During the first quarter of this year, however, production growth slowed to 0.4%.
One reason for slower production growth this year, in addition to faster-growing imports of these goods, is that consumers are spending disproportionately more for services, as the travel, food service, accommodations, and entertainment sectors are among the last to recover from the economic effects of the COVID-19 pandemic.
In addition to food, several other nondurable consumer goods industries consume an above-average share of corrugated boxes. These include tobacco, clothing manufacturing, paper products, chemical products, and plastic goods. The table at the bottom of p. 4 provides average annual production growth rates over the past five years and for the past year.
Just as in the areas described, slow growth is also a characteristic of these goods. Over the past five years, tobacco production has dropped by 4.3% per year, as the number of smokers drops. This past year showed an even larger drop of 6.4%.
While few clothing items are made domestically, those that are consume corrugated packaging. After five years of shrinking at 1.5% per year, clothing production rose by 3.1% in 2022.
Paper products production has declined fractionally over the past five years. In 2022, the pace of decline increased to 2.1%.
Chemical and plastic products consume most of the corrugated packaging in the nondurable goods sector, excluding food. These industries supply household and industrial cleaning supplies as well as health and beauty products.
They too have shown only fractional growth over the past five years, but both recorded above-average growth in 2022.
Certainly, anyone supplying corrugated boxes or any other type of paper packaging would like to see customer demand growing faster than is the case for consumer nondurable goods. Yet, because these goods are necessities of life, one can count on demand being there even if it is not growing rapidly.
Dick Storat is president of Richard Storat & Associates. He can be reached at 610-282-6033 or storatre@aol.com.
