September 21, 2021
The COVID-19 pandemic has reshaped the U.S. economy in many ways. The generous provision of deficit-financed cash and unemployment benefits is among the most important.
As a result of this and reduced spending for services such as travel, entertainment, and dining out last year, U.S. consumers have amassed an excess of savings of some $2.2 trillion compared to the pre-pandemic savings rate. Much of this will continue to support the record levels of consumer spending that started last year and are continuing into 2021.
While the most rapid growth has been for durable goods, spending on packaging-intensive nondurable goods has also soared. Through the first five months of this year, spending has remained 10% above prior-year outlays. The result should be record-setting domestic production of these goods. That has not been the case, however, as industrial production of nondurable consumer goods has risen by a much smaller 3.2% over the same five months of this year.
Imported consumer goods, and especially the excess of imports over exports, are the main explanation for this disparity. We have assembled a list of nondurable trade products requiring corrugated packaging and examined the trends over the past several years. Imports of these goods have been running at a level of almost $100 billion per month, while exports of the same products have amounted to less than half that amount. As a result, the trade deficit for packageable goods exceeded $50 billion and had risen by 32% through May of this year. The top chart at right shows the trend of the packaging trade deficit over the past three years. The deficit has exceeded its prior-year level every month since May 2020.
Looking more closely at foods, products that consume a disproportionately large share of corrugated packaging, we see that the trade data depicts an even worse situation for domestic producers and their paper packaging suppliers.
In 2017, exports of food products amounted to $64.1 billion, while imports were $60.9 billion. The result was a positive trade balance of $3.4 billion. That meant that U.S. corrugated producers had the opportunity to sell more packaging than was available from only the production for domestic use. However, as the bottom chart above depicts, that situation has deteriorated steadily and rapidly during the past three years. By the end of 2020, the trade balance descended to a deficit of $5.8 billion. In only three years, the market for packageable food and kindred products available to domestic converters declined by $9.0 billion. Last year, exports of these goods rose by a fractional 0.9%, while imports grew by 6.1%.
Produce, including fruits, vegetables, and tree nuts, consumes a significant amount of corrugated packaging. The fruits, vegetables, and tree nuts chart shows recent trade data for these products. Last year, exports of these products totaled $17.8 billion, a decline of 0.9% per year on average since 2017. Over the same period, imports grew, rising by 2.0% per year on average.
As a result, the trade deficit for produce items increased from $11.8 billion to $14.2 billion, further reducing the amount of product available to be packaged in domestically produced corrugated containers.
Packaging of beverages, both alcoholic and nonalcoholic, is a third category of interest to independent producers of paper-based packaging. In this category, the trade deficit amounted to $15.3 billion at the end of 2017 and had deteriorated to $17.5 billion by the end of last year, as shown in the final chart above.
Exports of beverages declined by 1.6% last year but were unchanged, on average, since the end of 2017. While exports declined, imports continued to grow, having increased by 2.2% last year and having averaged an annual growth of 3.0% per year since 2017.
The result of these changes was that the trade deficit increased by $2.2 billion, or 14.4%, since 2017.
While numerous other factors affect the size of markets available to independent producers of paper-based packaging, imports and exports of packageable goods are major factors contributing to the persistent lag between the regular growth in domestic consumption of food, produce, and beverages and the consistently less rapid growth of domestic production of these goods.
Dick Storat is president of Richard Storat & Associates. He can be reached at 610-282-6033 or storatre@aol.com.
