Report on the state of packaging – November 2011
Four-month monitoring of the packaging industry. Situation as of late November 2011 and early forecasts for 2012. By Roccandrea Iascone
Below is a cross-section of the progress of the sectors of the packaging industry in which packaging consumption is highest, subdivided into the macro-areas of food and non food. A description of changes in the packaging sector is to follow. The growth prospectives of the manufacturing sectors are taken from sector analyses carried out by trade unions and Prometeia.
Food industry (food and beverage)
The Italian food industry is the country’s second largest manufacturing sector in terms of turnover. After having shown in 2010 (as calculated by Federalimentare) a recovery of 1.8% compared to 2009, the industry should have ended 2011 with a modest 1% growth. More precisely, approximately +0.5% for the food area and +1.5% for the beverage area (whose production performance is due to a significant increase in exports).
The growth prospective for 2012 is cause for concern as far as domestic demand goes, due to the progressive drop in Italians’ purchasing power which will determine an orientation toward reduced consumption and, at the same time, displacement to less expensive products. This will lead to shrinkage in monetary terms, but also stability in terms of volumes.
The growth dynamic of exports is different, with a continued favorable trend, but not so favorable as to determine significant increases in production, except in the case of alcoholic beverages, for which better progress is expected thanks to the significant weight of exports.
Non food
Pharmaceuticals - The activity of this promising manufacturing sector, according to the findings of Prometeia, seems to have ended 2011 losing some ground in production, due to a drop in exports (which account for 14-15% of production).
As for domestic demand, the growth trend carries on: +1% in 2011. The positive and consistent progress of domestic demand, as is known, derives from some demographic factors: an aging population, greater attention to quality of life and an orientation toward disease prevention.
2012 is expected to favor the sector: both domestic demand growth and the recovery of exports are reconfirmed. A 1.6% increase in production is expected.
Cosmetics and perfumes - 2011, according to the calculations of Unipro, should have ended with 4-5% growth in production, driven mainly by the progress of exports (approximately +15%) and the substantial resilience of the domestic market, thanks to the fact that personal care is by now considered an irreplaceable necessity, and 2012 is expected to see further growth.
Fashion system - After the positive growth of 2010, which had interrupted a long phase of dropping production caused by shrinking domestic demands as well as exports, 2011 saw further, progressive, heavy decline: the main reason, according to Prometeia, is significant shrinkage of domestic demand during the first eight months of 2011.
Decidedly positive is the progress of exports, but not to a degree as to compensate the negative dynamic of domestic consumption.
Primarily small concerns are suffering, those which sell products of low added value in Italy; on the other hand, large groups with a strong international vocation present a better growth dynamic.
Unfortunately, the possibility of a recession in 2012 is on the horizon, followed by reduced growth in exports and a net drop in domestic demand.
Furnishings and decor - In 2011, the furniture sector remained in a negative market situation similar to the three previous years: exports have progressively declined while imports have progressively increased.
According to Prometeia, 2012 will be yet another negative sign as far as domestic demand is concerned; on the other hand, the expected increase in exports will not manage to compensate for the crisis of the national market.
Chemical products - According to the periodical market analysis developed by Federchimica, the situation of Italy’s chemical sector - which ended 2011 with 8% growth in volume - has slowly deteriorated since September 2011; but the year should anyway have ended in the black.
This growth is sustained by exports, which, during the first semester, saw +9%, compared with the progressive shrinkage of domestic demand.
After the drop in domestic demand during the second semester, which happened alongside growth in exports (although at lower rates), the interim results for 2011 lend themselves to expectations of 1.5% production growth, in particular: +1% domestic demand, +3% imports and +5% exports.
In addition to declining demand, in 2011, there were also high increases in the costs of raw materials.
At the moment, 2012 looks to be a difficult year: production, in the best case scenario, will reconfirm 2011 values.
Mechanical engineering - During 2011, Mechanics continued to display a growth process that began in 2011 and involved both domestic and foreign demand.
The year should have ended with an increase in production of approximately 4.5%. Prometeia expects positive growth also for 2012, although to a lesser degree compared to 2010 and 2011.
Electric appliances - The economic situation of this sector in 2011 further deteriorated with respect to a 2010 that was already distinctly negative.
The situation of this sector sees a constant drop in production, also due to the transfer of some production lines abroad, dwindling exports and a domestic demand which resumed shrinking in 2011. For the moment, no improvements are expected for 2012.
Construction materials - The situation of this manufacturing sector continues to look more bad than good, according to the analysis made by both Prometeia and the sector’s trade union.
For some years now, the outlook of this sector has continued to present levels of activity in progressive decline, and expectations for 2012 involve things getting worse. The biggest sufferers are cement, rebars, bricks, lime and plaster. Ceramic tiles and building glass, on the other hand, exhibit growth following an increase in repairs.
The data cited in this report have been taken from the database of Istituto Italiano Imballaggio
Economic outlook
Since summer 2011 we have found ourselves faced with a progressively worsening international global economic scenario in all major advanced economies, and even the dynamism of emerging economies has been tempered. In Italy, unfortunately, the slowdown has become more severe than what has been happening globally.
According to Confindustria, since spring 2011, the Italian economy has suffered from the global slowdown and the instability of financial markets, exacerbated by the sovereign debt crisis in the Eurozone.
The corrective measures put in place to restore public funds in all EU countries entail at first a slowdown in the growth trends of the respective economies.
The worsening of the international and national economic outlook led the Confindustria research center to revisit (for the worse) its predictions for Italy’s GDP, which is now expected to grow by 0.7%, as opposed to the 0.8% formulated in June; for 2012, the center’s June prediction of 0.6% passes to 0.2%, effectively meaning a halt in growth.
The possibility has not been excluded of slight shrinkage of Italian GDP in the first months of 2012 followed by a slow recovery starting in the spring.
Domestic demand remains weak, owing to the extreme degree of uncertainty, which discourages and delays expense decisions: high unemployment heavily influences the drop in real wages of families.
The progressive weakening of the production cycle of the major international economies since the summer will not allow Italian concerns to compensate with higher exports for domestic sales that show very little dynamism and have been made even more fragile, in the short-term, by the measures to reduce public deficit which the new administration will have to adopt.
2011 thus appears to have ended with growth trends decidedly lower than those predicted in late 2010 by all economic research institutes.
According to a recent joint report presented by Prometeia in late November 2011, the Italian manufacturing industry, for example, ended 2011 with 1.3% growth, as opposed to the 1.8% hypothesized in November 2010.
However, the growth prospects determined for 2012 evidence a worrisome scenario. Referring again to the analyses made by Prometeia, for the Italian manufacturing industry a 0.5% drop is expected.
The GDP growth analysis, according to the International Monetary Fund, also presents a growth prospect which is unfortunately by no means positive.
And while the end of year data for 2011, in the EU, indicate growth contained at 1.4% (for Italy growth should be 0.7%), what prove much more troubling are the forecasts for 2012: EU +0.9 and Italy, as mentioned above, with shrinkage in the first months of the year and with slow and modest recovery during the course of the second semester.
Things look by no means better for Italy considering the expectations for 2011 and 2012 in terms of other economic indicators. In detail, they are as follows:
- employment +0.6 in 2011; -0.1 expected in 2012;
- general consumption price index +2.7% in 2011; +1.7% in 2012
- income available to families -0.4% in 2011; -0.7% in 2012;
- investments +0.7% in 2011; -0.8% in 2012;
- cost of raw and semi-processed materials +7.9% in 2011; -0.8% in 2012.
