Aerospace and Packaging

Aerospace Production Poised for Growth in 2014; Growth in Packaging to Moderate

Aerospace Production Poised for Growth in 2014
While aerospace production grew in 2013, it grew at a decelerating rate throughout the year. Based on a number of leading indicators, however, it looks like such aerospace production should grow at a faster rate in 2014, which would indicate an increase in the demand for molds and plastic parts.

One of the most important leading indicators of aerospace production is system revenue passenger miles (SRPM). This is essentially a measure of airplane volume usage, as it is the product of the number of passengers times the number of miles for every flight in the United States. On average, SRPM tends to lead aerospace production by one to two years. SRPM has been growing at an accelerating rate for seven months (see chart). This indicates that the annual rate of change in aerospace production could turn up as soon as this summer. Actual production data would begin to increase prior to this upturn in the annual rate of change.

Also, Gardner’s aerospace business index is showing a positive outlook for the aerospace industry. According to the index, the industry has grown for four straight months, and this growth has been at a significantly faster rate than most of 2013. New orders also have been growing for four months. More importantly, backlogs have increased for four months in a row, too. Rising backlogs is an indication that capacity utilization will improve in the near future, and rising capacity utilization is a leading indicator of increased capital investment.

You can see all of our data related to the aerospace industry at gardnerweb.com/forecast/aerospace.htm.

Growth in Packaging to Moderate
Packaging is closely tied to the production of consumer goods. Therefore, following the trends in consumer goods production will provide an indication of what is happening in the packaging industry.

Consumer goods production is at its highest level since February 2008, and it has been growing at a steadily accelerating rate since the summer of 2011. The current rate of growth is the fastest in consumer goods production since the spring of 2006; in fact, the current rate of growth is one of the fastest since 2000.

However, it appears that the rate of growth in consumer goods production and, consequently, the use of packaging, will level off or even decelerate into the summer months. This is because the rate of growth in consumer spending, which leads consumer goods production by three to six months, has been slowing down since the summer of 2011. While this rate of growth in consumer spending has stabilized, it is not indicating faster growth in consumer goods production.

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