Report on the state of packaging – August 2015

Four-month survey of the packaging industry. Situation as of late August 2015.

Below is a breakdown of the performance of manufacturing sectors with the highest use of packaging, subdivided in the macro-areas of food and non-food. An analysis of the packaging sector will follow. The performance trends of the manufacturing sectors are taken from sector analyses carried out by sector associations, as well as Prometeia.

Food industry (food and beverage)
According to Prometeia, after logging three years of progressive decline in transactions, in 2015 the Italian food and beverage industry has seen a progressive strengthening of its recovery, which began during the first half of the year. Production is expected to increase by 1.6%, driven by growing exports (+3.8%) and domestic demand (+1.7%).
Production is expected to show 1.4% growth in 2016, determined by 1.2% growth in domestic demand and 4% growth in exports.
Beverages, which in the past have experienced the largest contractions, are currently showing the strongest performance.

Pharmaceuticals
According to Prometeia, after ending 2014 with 1.1% growth in production, the sector should strengthen in 2015 with 1.8% growth, and this should also continue in 2016 (+2%).
Production growth is essentially driven by the strong performance of exports (+10% in 2014), expected to grow by 3% in 2015 and 3.9% in 2016.
Domestic demand (which also continued to grow during the years of the crisis, albeit to a lesser extent than before) shows a modest but steady growth trend: 0.5% in 2014, +1.7% expected in 2015 and 1.2% in 2016.
Domestic consumption of pharmaceuticals is essentially tied to an aging population and increased attention to preventive medicine.

Fashion system
According to Prometeia, the sector resumed growth in 2014.
Production recovered with 1.8%, caused by growing exports, and domestic demand reversed a long recessive trend with a 0.7% recovery. Imports have continued to grow.
The medium-term prospects for the Italian fashion industry remain good. A deflated turnover confirming the average growth trend of 1.4% is expected in 2015, and 1.6% in 2016.
The expected growth will not recover the losses of the crisis years, but will enable the sector to consolidate its recovery after years of heavy shrinkage.

Cosmetics and perfumes
According to the periodic analysis conducted by Cosmetica Italia, in spite of a slight contraction in the domestic market for the second time, this sector saw 1.7% growth in production thanks to the strong performance of exports (7%).
Further production growth is expected in 2015, partly tied to the recovery of domestic demand. Expectations for 2016 are decidedly positive.

Furniture and décor
According to Prometeia, thanks to the recovery during the last quarter of 2014, the furniture industry showed a growth of 0.3% (as late as autumn 2014 forecasts were for a further 0.6% decline). The recovery was driven essentially by exports, which ended the year with +1.8%. By contrast, domestic demand dropped 0.3%. 2015 sees a continued recovery of ground lost in production during previous years, to the point that the year should close with a trend of 0.9% growth, and for the two-year period of 2016-2017, growth should be about 1% yearly average.

Chemical products
According to Federchimica, the sector should continue in 2015 with the recovery that began in the final months of 2014: production is expected to grow by 1.4%, driven by improved performance in exports (+3.2%) and growing domestic demand (1.3%), following a two-year decline. Imports will also have a growth trend, estimated at 2.5%.
The consolidation of the Italian chemical industry will increasingly be tied to exports of high tech products.

Mechanics
Following the crisis of the two-year period of 2013-2014, principally related to a collapse in domestic demand, growth prospects in 2015 are positive. Production is estimated to grow by 2.3%; exports and imports should grow by 3.2 and 3.3%, respectively. Domestic demand is also expected to grow by 1.8%.
The progressive recovery of production should continue in 2016, as well as during the three-year period of 2017-2019, driven both by domestic demand and exports.

Electric appliances
According to Prometeia, the sector’s production began to show early signs of recovery during the course of 2014, showing +3.4%. The recovery has been driven by 2.3% growth in exports.
Domestic demand, on the other hand, is still down.
Imports show clear growth (+8.5%).
The prospective growth for 2015, and through to 2019, should see a slow recovery of domestic demand (1.2% yearly average), attributable essentially to import products.
Projected progressive growth for exports: +2.6% in 2015, +2.5% in 2016 and +2.9% yearly average in the three-year period of 2017-2019.
Production is expected to recover, but with a very modest trend, sustained exclusively by exports.

Building materials and metal household products
After a long three-year recession (2012 to 2014), the sector seems to have started a progressive but slow recovery in 2015. Prometeia estimates a production recovery of 0.9% and projects a significant recovery between 2016 and 2019.

Construction
The sector’s long recession continued in 2014, of course also affecting building materials (cement, concrete, curved bricks, reinforced concrete, etc.).
Production in the construction sector has declined by 28% over the last seven years, but performance was weak before as well.
Prometeia estimates that construction closed 2015 with another slight contraction (-0.1%), but considers this a possible sign of an end to the long recessive trend.
The  prospectives are moderately positive: +1.5% in 2016, +1.8% yearly average in the three-year period of 2017-2019.                                      

General economic outlook
According to Confindustria, during the fiscal quarter June-August 2015, the Italian economy’s growth trend improved.
Production, turnover and orders accelerated the recovery, driven mainly by domestic demand. Employment resumed growth, and confidence and household spending capacity were consolidated. Investments also show supply signs of recovery.
Italian industrial production showed a recovery of 0.5% during the first quarter and 0.8% during the second quarter.
Prometeia also illustrates that, after ten quarters of decline, interrupted only by the stagnation of 2013, the Italian economy has ended a long recession. This is confirmed by GDP performance data in the fourth quarter of 2014 and the first half of 2015.
Following 0.6% production growth in 2014 – thanks to the beginning of the recovery in the last two months of the year – the Italian manufacturing industry expects to see 1.8% growth in 2015.
Also according to Prometeia findings, 2015 should see +3.4% growth in exports, 4% in imports and 1.7% in domestic consumption.
Medium term growth projections show a progressive consolidation of manufacturing: +2.1% in 2016 and +2% yearly average during the three-year period of 2017-2019.
Also according to Prometeia, general economic indicators during the early months of 2015 also confirm a general outlook of moderate recovery of the international economy, albeit at different rhythms in different sectors.
The strongest recovery among advanced economies is in the Eurozone.

The packaging sector
In quantitative terms, the sector ended 2014 with 1% growth in production, following a progressive decline that lasted from 2011 to 2013. Looking at the performance of the packaging sector, the slight recovery can be attributed, for a majority of sectors, to the growth seen between November and December.
The trend reversal is essentially driven by domestic demand, which grew by +2.4%. Exports saw 1.8% growth. Imports have increased considerably, at +16% (19% of consumption).

Growth prospects for 2015
Considering production in the various supply chains of the packaging sector, one can observe growth in all industries: +3% in steel packaging, +6.6% in aluminium, +2.2% in cellulose, +3% in rigid polylaminate, +1% in plastic, +3.9% in converted flexible polylaminate, +0.9% in glass packaging and +1.8% wood packaging.
Also according to provisional estimates, the packaging sector appears to have experienced 3.8% growth in turnover.
This turnover estimate appears accurate, considering that 2014 saw modest growth in raw materials used to produce packaging.
Performance of the packaging sector in 2015 is projected to show a slow but progressive increase in production, driven by growth in both domestic demand and exports.
Based on the latest analyses, 2015 is expected to show 2-3% growth in production, driven mainly by domestic demand.
The economic recovery, in Italy and in the European Union, is expected to be progressive but slow. 

The data used for this report are taken from the database of Istituto Italiano Imballaggio                   
             
Plinio Iascone
Istituto Italiano Imballaggio