Packaging and Aerospace

Packaging Market Outlook: Steady Now, Accelerating Later; Aerospace Market Outlook: Too Much Congressional Ineptitude


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Packaging Market Outlook: Steady Now, Accelerating Later
The economic fundamentals of the U.S. plastics packaging market are mixed at the present time, but they should steadily improve in 2014. The biggest impediment to more rapid growth in the near term is the persistently sluggish rise in household incomes. The data clearly show that most Americans are not spending as much as they did prior to the recession. Income growth is stagnant and confidence levels remain low. Spending growth is positive, but unimpressive. Total consumer spending for the types of goods that are packaged is growing at a rate of about 2 percent per year. This has not changed much throughout the past four years. Our forecast is for a gain of 3 percent in 2014.

Another factor that is important to packaging manufacturers is the price of materials. Resins prices in the U.S. correlate closely with the price of crude oil. At the present time, crude oil prices are in excess of $100 per barrel, which is quite high by historical standards. At some point in the future, resins prices in the U.S. will be more directly correlated to the price of natural gas, but for now, plastics processors must contend with high materials prices.

One trend that bodes well for future demand for plastics packaging products is the trend in profit levels for corporations that manufacture food and kindred products. According to data from the Bureau of Economic Analysis, corporate profits for food manufacturers are at an all-time high. High profit levels typically precede increased investment in the research and development of new products, and a sustained flow of new product introductions portends strong demand for new packaging. We are not yet at a time when this is happening, but it could start to happen very soon.

Aerospace Market Outlook: Too Much Congressional Ineptitude
At the present time, it is impossible to generate a forecast for the aerospace industry due to the inability of Congress to pass a budget, avert a government shutdown and constructively deal with the debt limit problem. But despite the fact that we cannot see through all of the fog currently being generated in Washington, there are some positive fundamentals in this industry that will spur future production once Congress gets out of the way.

On the domestic side, Boeing appears to be killing it. There is strong demand for its new airplane, and projections for global air miles traveled point to sustained increases. Demand for passenger travel and air cargo is strong, and airlines are even threatening to turn a profit. The only thing that seems to mitigate the ever-increasing premium that consumers put on the time and convenience advantages, which air travel offers, is concern about security. So barring any unforeseen disasters or geopolitical catastrophes, demand for air travel will steadily increase.

On the defense side, the ineptitude of Congress has done nothing to make the world a safer place. There is strong global demand for many types of military aircraft. Domestic demand is being spurred by the increased use of unmanned aircraft (drones) for law enforcement. Law enforcement agencies are increasingly attempting to deal with issues such as border security and increased drug trafficking through the use of more “eyes in the sky.”. Privacy concerns and budget constraints are the main impediments to future growth, but the trend toward increased use of military-style aircraft, both at home and abroad, will likely continue.