Folding Carton Shipments Remain Strong Despite Softness in September

ALEXANDRIA, Va.—The Paperboard Packaging Council (PPC) announced that folding carton shipments reached an estimated $7 billion and 4.4 million tons in the first three quarters of 2006. When compared with the first three quarters of 2005, shipments in dollars increased by 3.2 percent, while tons increased by 3.4 percent. So far, 2006 remains one of the strongest years measured by year-over-year growth since 2000.

But, monthly shipments in August and September show some signs of a softening market. For the first time in 2006 there was a clear downward trend in shipments. Orders in August were high compared to September shipments, suggesting that some orders were pulled or sent to the warehouse as “make-and-hold” finished products until needed. A spike in finished goods inventory suggests that the latter is definitely happening. Orders remain strong in September at a 5.9 percent year-over-year increase, which suggests that shipment numbers in the fourth quarter could improve or we could see further increases in the finished good inventory.

Folding carton shipments are a leading indicator of the consumer nondurables market. The weakness in the market we see may be an indicator of slowing industrial production. In fact, the Federal Reserve is reporting a 1 percent decrease year-over-year in Industrial Production for consumer goods for September, after several months of growth. The PMI index remains over 50, but has dropped 1.6 percentage points between August and September to 52.7 percent.