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.