Medical and Packaging

Future of medical manufacturing is uncertain, while rapidly growing food/beverage spending means more packaging.

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Future of Medical Manufacturing Is Uncertain
We last looked at the medical industry in June 2016, and a lot has happened since then. We had a presidential election in which the Affordable Care Act was a significant topic of debate. Should it be modified? If so, then how? Or should it be scrapped altogether? With Donald Trump having won the election, there has been talk that the Affordable Care Act will be repealed, even if the Trump administration and the Republicans have nothing significant with which to replace it. As a result, there’s a significant question mark related to the future of medical manufacturing.

In 2016, real medical care spending continued its pace of large increases that it had been setting since early 2014 most probably due to the Affordable Care Act. After the first quarter of last year and as the election drew near, real medical care spending flatlined. This showed up in the annual rate of change in medical care spending (the blue line on the chart). As absolute spending on medical care flatlined, the rate of growth decelerated significantly. While the annual rate remained strong compared with the last decade, it is likely that it will continue to slow in the first half of 2017 as it approaches the historical average growth rate.

Medical equipment production tends to lag medical care spending by 12-18 months (matching up the peaks and troughs between the blue and black lines). With the dramatically accelerating growth in real medical care spending in 2014 and 2015, it therefore came as no surprise that medical equipment production increased dramatically in 2016. It fact, 2016 was the strongest period of growth in medical equipment production since 2007. The rapidly accelerating growth in medical equipment production should continue through at least the first quarter of 2017 and maybe well into the second quarter. Changes in medical legislation are likely to have a significant impact on the trend, however.
 


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Rapidly Growing Food/Beverage Spending Means More Packaging
Even though real disposable income has grown at a decelerating rate for almost 18 months, real food and beverage spending has accelerated rapidly. Compared with one year earlier, food and beverage spending increased 5.4 percent in November 2016. This was the second month in a row with growth higher than 5 percent, and was more than three times as fast as the average growth rate.
The last time food and beverage spending grew this fast was December 1999. As a result, the annual rate of change in November was growing at its fastest rate since May 2007. This should mean an increase in demand for packaging.

 

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