Report on the state of packaging – November 2012

Jan 22, 2013

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Quarterly packaging industry observatory. Situation as of late November 2012
By Plinio Iascone

Below is a sample analysis of the manufacturing sectors in which packaging consumption is highest, divided into the macro-areas of food and non-food.
This report will be followed up with one concerning the evolution of the packaging sector. The evolution of the various manufacturing sectors, on the other hand, are taken from sector analyses executed by trade associations or by Prometeia.

Food industry (food and beverages)
The food industry, according to Prometeia, has experienced dropping production since 2011: -.09% in 2011 and -0.3% in 2012.
Considering 2012 in particular, there has been a 0.1% drop in imports, a 2.1% increase in exports and a 1.1% drop in domestic demand.
For 2013, a steady but slow recovery is expected, driven principally by exports, which are expected to rise by 2.6%.
The food and beverage sectors have diverging production trends.
Production in the food area shrunk by 0.6% in 2011, and again in 2012 at the same rate; on the other hand, the beverage sector shrank 2.7% in 2011 and 2.2% in 2012.
Slow recovery of production is projected for both sectors in 2013.

Non food
Pharmaceuticals In 2012, the pharmaceutical sector was also affected by the economic crisis underway, but it managed a mostly positive balance sheet, although the growth trend has been re-scaled compared to the past. Domestic demand, after years of consistent average yearly growth of 2-3%, has probably not surpassed 1% in 2012, caused both by government measures to control public health costs and by a reduction in purchase of non-subsidized products by families due to tighter household budgets. International trade is also slowing down, albeit with positive values of in both exports and imports.
More of the same is expected for 2013.

Fashion system According to Prometeia, after finishing 2011 with slowed growth, that is still positive thanks to exports, production in this important manufacturing sector recorded net shrinkage in 2012: -4%.
The negative growth concerned both trade (-8.8% exports and -4.8% imports) and domestic demand (-5.4%). The evolution of the Italian fashion industry for the next two years still appears rather weak. The growth potential of Italy’s industries primarily relates to the possibility of their insertion into emerging markets.

Cosmetics and perfumes Cosmetics, which managed to come through previous economic crises unharmed, began to record negative values in 2012; the hardest hit is domestic consumption, which is losing ground. Exports should have finished the year with positive growth, although with a lower growth rate than the previous two years. In terms of production, there should be slight growth. According to Unipro, the growth potential for 2013 remains high, particularly for exports to non-EU countries.

Furniture and interiors Going through a crisis that began in 2010, according to Prometeia, this sector finished 2012 with an 8.3% drop in production. A gradual recovery will only be possible with exports, because domestic demand has been dropping progressively since 2011, and no reversal will be possible before 2014-2015.
In the medium-term, progressive growth is expected for imports (which dropped in 2012), especially in relation to the growing presence of Ikea in the Italian market.

Chemical products According to Federchimica, the chemical sector finished 2011 with modest production growth of approximately 1.5%, supported mainly by exports. In 2012, the chemical sector, like other manufacturing sectors, went into recession.
According to calculations in terms of volume, domestic consumption has fallen by 6%, exports have grown by 1%, and imports have dropped slightly. In quantitative terms, the drop in production was of 3.6% (2.4% in 2011).
2013 should see a 1.1% recovery in production.

Mechanics After finishing 2011 with a 3.6% increase in production, thanks to positive growth in exports, 2012 looks to be recessive: a 3.5% shrink in production caused by a 10% collapse of domestic demand, not compensated by export trends, which limit growth to a modest 1.1%.
There was also a significant drop in imports (8.6%).
A slow and modest recovery is expected for 2013, but only in the last months of the year, and driven by exports.

Electric home appliances This sector has been experiencing difficulty since 2010, feeling the transfer abroad of production and an increase in imports (both from Italian concerns that transferred their production sites abroad and from foreign producers).
The 2012 drop in production, according to Prometeia, is of 6.2%, and further shrinkage of 1.1% is expected for 2013.

Construction materials The outlook is very grim, conditioned by a construction recession that has been ongoing for years.
According to Prometeia’s periodical survey, the various materials destined for production (cement, glass, ceramics, plaster, rebars for reinforced concrete) fell in production by about 8% in 2012, compounding the shrinkage of the last four years. Prometeia believes that a slow recovery should begin in 2013.

For further info link to The packaging sector

The economic outlook
Economic indicators suggest that 2012, according to early estimates, will end with a worsening of the recession that began in the fourth quarter of 2011.

The manufacturing sector sees a drop both in production and in new orders.
This picture concerns all EU countries, and is even beginning to affect Germany, which has managed to keep under control the negative effects of the economic crisis thanks to growth in services and the resistance of its exports.
The situation continues to look particularly drastic for Greece, Spain and Portugal.
Unfortunately, the recessive waves are moving out from the Euro Zone to affect the rest of the world as well, compromising growth that had been recorded in many places during recent years.
Globally, 2012 will end with 2.8% growth (in 2010 it was 5.2%). Certain areas are still growing, although at lower rates than before: USA +2.1%, Japan +1.8%, the BRICs +5% (in 2010 their growth was in the double digits). The euro area saw shrinkage of 0.4%.
In Europe, only Germany and France look to end the year with modest GDP growth, of +1.5 and +0.3%, respectively.
For Italy, the recovery looks unfortunately to have moved further away: domestic demand presents greater drops than expected in the beginning of the year, and exports turned out less dynamic than before.

According to the periodic analyses carried out by Confindustria, the Italian economy ended 2012 in net recession, and, unfortunately, there are no signs of reversal in the short term.
GDP is estimated to have fallen by 2.4-2.6% in 2012.
Also according to Confindustria, there is a chance of a slight reversal in spring/summer of 2013.
The recovery will be slow, and Confindustria believes that the year will still end with negative growth between -0.6 and -0.3%; this hypothesis is supported by the 0.6% drop in volume of orders to be delivered by the first quarter of 2013. It is commonly held that the signs of recovery may begin to emerge in autumn 2013.
Domestic demand, again according to Confindustria’s research center, will remain negative for much of the first half of 2013.
As for consumption by Italian families, following the 3.2% drop recorded in 2012, it should begin to improve in the second half of the year, but not so much as to return to pre-crisis levels. On the other hand, exports should begin to progressively strengthen during the course of 2013.

Prometeia’s habitual surveys also evidence a decisively negative picture for the manufacturing industry in 2012.
In fact, production should fall 5.3%, imports 6.2%, while exports increased by 0.5%, and domestic demand fell by 5.6%.
In 2013, the manufacturing industry should develop in the following way:
- production +0.4%
- imports +1.1%
- exports +2.1%
- domestic demand -0.1%
The weak reversal, according to Prometeia’s analysis, derives from a first half of 2013 still in recession. At the moment, a true recovery is expected only in 2014.

The information used for the calculations in this report are taken from the database of
Istituto Italiano Imballaggio