AICC Boxscore 2013

CORRUGATED INDUSTRY TRENDS

More Jobs = More Box Sales By Dick Storat, President, Richard Storat & Associates, Inc.

Economic growth stimulates new box demand. That’s straight- forward. And there are only two drivers for growing the nation’s gross national product, the principal measure of economic output: more workers to produce more goods or services, and more output from the existing work force – productivity gains. Productivity gains are usually largest as an economy initially recovers from recession as firms strive harder for efficiency gains, increasing the hours worked by existing workers and taking other measures to “do more with less.” Since the last recession in 2008, labor productivity in the US manufacturing sector has chalked up substantial gains, averaging an annualized increase of 3.7% since hitting its recession low in the 1st quarter of 2009. While independent boxmakers supply boxes to the

entire spectrum of manufacturers, some are more focused on the producers of non-durable goods, while others are more oriented to customers producing durable goods that are intended to last for three or more years, like furniture or home appliances. During this last economic recovery, makers of durable goods have achieved average annualized productivity gains of 5.8% since hitting bottom in the first quarter of 2009. Box makers supplying manufacturers of food products and other non-durable goods have not fared nearly as well. The average annualized productivity gains for manufacturers of non-durable goods since hitting bottom have been a much lower 2.1%. However, this year productivity gains have stalled in the manufacturing sector, as manufacturers reach the limits of what can be produced more efficiently with the same work force.

Increasingly, it will now take new jobs to create additional economic growth. By examining recent trends in employment gains, box makers can get clues as to where pockets of future growth may be created. In those growth sectors lies the potential for additional box demand. During 2012, the Bureau of Labor Statistics reported that 1.464 million net new jobs had been created in the private sector of the US, an annual growth rate of only 1.3%. Only slightly more than one-fifth of the added jobs were in the goods producing sector. Of those 313,000 jobs, 171,000, or just over half, were additions to manufacturing sector employment, which experienced a 1.45% annual increase, marginally better than the overall private sector employment growth rate. Within the manufacturing sector, 80% of the new jobs were in the durable goods sector, concentrated in the automotive and transportation sectors. This was welcome news for those independent boxmakers supplying packaging throughout the transportation equipment supply chain. Nondurable goods saw the creation of only 34,000 jobs, concentrated in the packaging-intensive food, beverage and tobacco manufacturing sectors. The paper and paper products industries, into which independent boxmakers are categorized, lost 6,000 workers in 2012, a 1.4% annual decline.

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