Report on the state of packaging – April 2013

Four-month survey of the packaging industry. Situation as of late April 2013.
By Plinio Iascone - Istituto Italiano Imballaggio

Below is a cross section of manufacturing sectors in which the most packaging is consumed, divided into the macro-areas of food and non-food.
The growth prospects of the manufacturing sectors are gleaned from a sector-by-sector analysis conducted by trade associations or Prometeia.

Food industry
(food and beverage)
Since 2011, according to Prometeia, the food industry has undergone a recession in production. The 2012 analysis shows a 0.3% drop in production. Domestic demand fell by 1.1%, and no recovery is expected for 2013.
Exports managed 2.1% growth, while imports dropped slightly.
2013, still according to Prometeia assessments, will be marked by a slight recovery in production (around 0.3%), driven by exports, while further decline is expected for domestic demand.

Pharmaceuticals
The pharmaceutical sector also felt the pangs of the economic crisis during 2012, but still managed a slight growth of +0.5% in production; however, this growth trend is more modest than before. The growth was mostly sustained by exports.
Domestic demand, after years of constant growth, maintained the same values as the previous year.
This situation has been determined by efforts to contain public health expenditures, but was triggered in particular by a reduction in purchases of non-subsidized products.
More of the same is expected for 2013.

Fashion system
After ending 2012 with a 4% drop in production, this manufacturing area, according to Prometeia, will register slight decline in 2013. In 2012, both domestic demand and exports fell. The latter is expected to grow in 2013, but not enough to compensate for domestic demand, which is expected to continue to decline.

Cosmetics and perfumes
This sector, which in the past has managed to come out of crises unscathed, during 2012 recorded negative values, especially in relation to domestic consumption, which fell slightly.
Exports managed to end the year with net positive growth, although with a growth rate lower than the previous two years. From the standpoint of production, the year saw slight growth. The sector’s growth potential for 2013, according to Unipro, remains moderately positive, in particular with regard to exports outside the EU.

Furniture and appliances
This sector, according to Prometeia, ended 2012 with an 8.3% contraction in production: this crisis has been ongoing since 2011, caused by a progressive reduction in domestic consumption and a contraction in exports.
The development context of this sector will remain vulnerable even in the short term, following a domestic demand that may have contracted further and very modest growth in exports.
Italian furniture manufacturing continues to face stiff competition from Ikea, including within Italy, especially in relation to mid-range furniture.

Chemical products
Like other manufacturing areas, the chemical sector went into recession in 2012. According to Federchimica’s calculations, with reference to values expressed in volume, domestic consumption fell by 5.5%, exports by 1.5% and imports by 5%.
Production fell by 4%.
2013 should mark a recovery of production, but it should be limited to 0.6%. The modest recovery is expected to be driven mainly by exports, because, in the best case scenario, domestic demand will be limited to 0.4-0.6% growth.

Mechanical engineering
According to Prometeia, the 3.5% contraction in production was caused by the 10% drop in domestic demand, which was not compensated by exports, whose growth was limited to 1.1%. Imports also fell considerably (8.6%). A slow and modest recovery, driven by exports, is expected for 2013, but beginning only in the last months of the year.

Electric appliances
Production continues to suffer a heavy crisis leading back to 2010. Prometeia forecasts a further 6.2% decline in production in 2012, and another 1.1% in 2013.
This situation has various causes: the transfer of production sites abroad, an increase in imports from both Italian concerns that have transferred production abroad and import flows into Italy from foreign competitors.
It is therefore believed that this manufacturing sector will have great difficulty recovering.

Construction materials
The state of this sector continues to go very badly, conditioned by a long recessive cycle in construction.
Materials destined for construction (cement, glass, ceramics, lime and iron bars for reinforced concrete) are not immune to this situation: in 2012, they saw an approximate 10% drop, compounded with the successive reductions of the last 3-4 years. It is difficult to imagine when the building sector will manage to reverse its negative growth trend. 

Economic outlook The year 2013 began in an economic context characterized by persistent negative growth throughout Europe and especially in Italy. Italy’s domestic demand shows no signs of recovery, and exports, although tending to rise, are insufficient to reverse the slowdown in production. Confindustria’s research center has shown that, in the first two months of 2013, both production and growth in orders declined; various ISTAT indicators would lead to the conclusion that the next few months, and indeed the first half of the fiscal year, will in all likelihood continue to be marked by recession conditions. The prospects of a possible reversal in trends for the manufacturing industry in 2013 have been confirmed both by Prometeia and by market analysts, such as Confindustria’s research center, for example, but these will not be sufficient for overall positive GDP growth in the year 2013. GDP is expected to slightly drop by another 0.5-1%, while manufacturing activities should have some modest growth of 0.4-0.5%, making for a slow recovery starting in autumn. However, these prospects for recovery depend on a reversal in the current recessive business cycle by the third quarter of 2013. Moreover, it is in any case widely believed that any recovery can only be driven by exports and the reconstitution of stocks, which are currently very low. In the best case scenario, domestic demand, on the other hand, would stabilize at the current low levels: in particular, food consumption should begin to slowly recover, while demand for non-food consumer goods may continue to fall. In light of the above considerations, a true recovery can be expected only in 2014.

The data used in this report are taken from the database of Istituto Italiano Imballaggio

The packaging sector