Report on the state of packaging – November 2014

Quarterly Italian packaging industry observatory. Situation at the end of November 2014.  By Plinio Iascone

Here is a glimpse of the evolution of the manufacturing industry sectors where packaging consumption is most intense, divided into food and non food macro areas. This is followed by the relative growth of the packaging industry.
The prospected growth pictures of the manufacturing sectors have been drawn from the sectorial analyses made by the professional associations or by Prometeia.

Food industry (food and beverages)
In 2014 the sector experienced its third consecutive annual decline (-0.8%) in activity levels. The contraction was due to the continued drop in domestic consumption, the recovery of which is predicted to be very slow and somewhat limited. The negative growth involves both food and beverages.
Very different the trend in exports, that have continued to show growth, but not enough to offset the downtrend in domestic demand.The biennium 2015/2016 should feature a slow recovery in production, substantially geared to exports, but also a slow recovery in domestic consumption.

Non Food Pharmaceuticals
According to Prometeia, 2014 should show a limited growth of 0.7%, driven by exports. However, domestic demand is also presumed to have finished the year with a slight uptrend.
The growth in consumption is mainly due an aging population and an ever greater tendency towards preventive action.

Fashion system
According to Prometeia, the recovery in exports after the sharp fall of the previous two years has limited the previous drop in production (now down to -0.8%).
Despite the still prevailing difficulties, signs of a slow recovery are setting in that should encompass both domestic demand as well as exports.
Production estimates show a slow but progressive growth; however, the progressive growth of imports is to the detriment of Italian output.
 
Cosmetics and perfumery
According to the periodic analysis drawn up by Cosmetica Italia for 2014, despite a still sluggish domestic market (and the downtrend will with all probability also dominate 2015) the year should end with a slight upturn, thanks to the upswing in exports, that are seen to have put in a + 5.5%.

Furniture and furnishings
According to Prometeia the segment registered a further drop in production of -0.6%, adding to the two previous years of crisis. The progressive growth in exports has failed to offset the decline in domestic consumption, that has dropped heavily since 2012.
As for imports, in recent years these too have shown a downturn: forecasts indicate that imports are liable to gain some ground at the expense of Italian products in the coming years.

Chemicals
After a gloomy three year period, according Federchimica the Italian chemical industry should have ended 2014 with an increase in production of 2%, comprising a 3.8% rise in exports and 1.5% rise in domestic demand. In the latter case imports put in a better performance, showing a + 2.5%.
Still quoting the Confindustria member association, the recovery is expected to continue into 2015 with production up + 2%; however, the levels will still be 15% down on 2007 figures.

Mechanical engineering
After two years of recession, according to Prometeia’s calculations the segment witnessed a 0.5% recovery in production in 2014, this driven by exports.
Domestic demand has instead continued to show a downward trend, notably involving Italian products (imports are seen to be showing progressive growth). Growth prospects for the coming years appear good both due both to strong exports and for the need to replace Italian industry’s by now obsolete machine stock.

Household appliances
After a long period of recession, in the last months of 2013 the sector embarked on a slight but progressive growthtrend.
Prometeia’s figures for 2014 indicate a recovery in production of 0.6%, drawn on by exports, that are seen to have increased 7%. Domestic demand is expected to show the first signs of a possible recovery, though this essentially involves imported products.

Building Materials
The long recession experienced by the construction sector continued into 2014, construction materials (cement, concrete, bricks, steel concrete reinforcements etc.) obviously also being affected. Over the past six years building activity has dropped a full 26%, and the figures for the years previous to that were anything but satisfactory.According Prometeia’s estimates, building industry sector activity, and hence also construction materials, should put in a gradual recovery, albeit along modest lines of growth: + 0.1% in 2015 and +1.5% in 2016.                                    

The economic picture
GDP down a further 0.2% (following, as is known, six years of crisis, except for a slight recovery in 2010) and household consumption still showing steady decline over the three year period 2012-2014. This, in short, the year’s end picture for Italy.
According to Prometeia the worsening national and European economic picture has stemmed any signs of a recovery in the Italian manufacturing industry scheduled for the end of 2014, with turnover at constant prices down 0.2%, added to the -8,8% of the two year’s previous, 2012/2013.
The downturn in Italian domestic production originates mainly from the collapse of Italian domestic demand: -0.3% In 2014, after an overall drop of 9.6% in the period 2012/2013. Hence the recovery of Italy’s domestic demand is still a long way off: estimated at a +1.2% in 2015 and a +1.6% in 2016 (ithe two year period 2012/2013 featured an overall drop of 9.6%).
The growth in exports, set at +1.9% in 2014 in the interim balance, has not offset the downturn in Italian domestic consumption.
The outlook for the Italian manufacturing sector will increasingly depend on the ability of Italian businesses to confirm and renew the successes achieved in the past.

The packaging industry
Closure estimates for 2014 speak of a situation substantially similar to 2013, thanks to the growth of exports that should terminate the year with an upswing of around 3%.
Imports are seen to be up slightly.
Unfortunately, Italian domestic demand is estimated to drop a further 0.5%. From 2010 to 2014 Italian packaging consumption dropped by 6.4%.