Report on the state of packaging - November 2013

Jan 21, 2014

Food industry (food and beverages)

The Italian food and beverage industry ended 2013 with a second consecutive annual decline in activity levels. The main difficulties appear to involve smaller companies, more and more penalized by the chronic weakness of domestic demand, the only main market for most of these concerns. At the other extreme the general expansion exports, which, however, are typically only open to larger companies.
If exports are expected to have finished the year with a +3%, domestic demand has dropped by around 2% (which is added to the decline of 4% in 2012).
The rescaling of the production for the period 2012-2013 (caused by the collapse of consumption) affected both the food area as well as the beverage industry.
In the period 2014/2015 a gradual recovery in activity levels is estimated, driven mainly by exports but also by a slow and limited recovery in domestic demand.

Non-food

Pharmaceuticals. Already in 2012, the pharmaceutical industry has been affected by the economic crisis, ending the year with a slight decline in production and decrease in domestic consumption (as a result of the reduction in purchases of non-reimbursable products by the health service as well as a considerable drop in the purchase of OTC medicinal products).
2013 would see slight recovery in manufacturing activity, driven primarily by a growth in exports (domestic demand has in fact remained stable at the low values of the previous year).
According to Prometeia, in the years 2014/2015, the pharmaceutical market is expected to show a positive trend in production driven by exports, but also a slow and gradual recovery in domestic demand.

Fashion system. Prometeia estimates that production in this sector during 2013 has continued a downturn. The only positive aspect involved exports that, after a downturn in 2012, showed a progressive increase in 2013. Still definitively negative domestic demand, that has been dropping since 2011.
The expected slow recovery in 2014 will continue to be driven by exports, as domestic demand is unlikely to put in a turnaround.

Cosmetics and perfumery. In both 2012 and in 2013 the industry was able to limit the rescaling of the internal demand via positive export growth trends.
But if overall production in 2012 put in a slight increase, figures for 2013 should show a slight decline.
The expectations for 2014 are geared to an export-led recovery in economic activity, but also by a slight recovery in domestic demand.

Furniture and furnishings. In crisis since 2010, over the three-year-period 2011/2013 this manufacturing sector marked a decline of around 20%, caused by both the crisis in domestic demand that the progressive decline in exports. Imports are also seen to be down.
2014 is seen as the year of a possible turnaround driven by exports, since domestic demand at best will not go beyond the figures for 2012.

Chemical products. According to Federchimica, the Italian chemical sector during the first half of 2013 continued to show a downturn following the already negative two-year-period 2011/2012.
During the summer of 2013, however, the first signs of a turnaround were seen, confirmed later in the autumn; yet due to the protracted crisis in the first half of the year, the year ended in a downturn: production decreased in volume by 2.2% (with exports increasing by 1.3%, imports down 2% and domestic demand down 3.5%).
Still according to Federchimica, in 2014 the chemical industry should be on the way to a slow recovery: production +1.3%, exports +2.5%, imports +1.5% and domestic demand +0.9%.

Mechanical engineering. Prometeia suggests that 2013 will still feature weakness on the internal market, together with the gradual slowdown in exports, leading to a slight downturn. The non-positive growth trend of 2013 follows on from an equally negative scenario for 2012.
2014 should very likely show a slow recovery, driven by both exports from the early signs of recovery in domestic demand.

Household appliances. Production dropped even further in 2013 following on from a negative three-to-four year period; over the last three years figures have dropped by roughly 12%.
According Prometeia 2014 should mark a reversal of the trend, driven both by domestic demand as a result of incentives on purchases, and partially also due to exports thanks to the beginning of the economic recovery in Europe.

Building materials. The long recession of the building industry stretches throughout 2013, with a further decline of about 6% covering all related areas: cement, concrete, bricks, rebars, etc.
Production has declined 25% over the past five years, and the trend in previous years was certainly not satisfactory.
In 2014, according to an analysis by Prometeia, the sectorial activity of the building industry (and hence of construction materials in general) could start a process of gradual recovery, albeit to moderate growthrates.

General economic outlook

Already troubled in 2012, the economy continued to falter through 2013, postponing expectations for a national recovery. Political stability, balancing the budget and freeing up credit are becoming increasingly urgently needed.

A recent analysis by Confindustria highlights the troubled situation of the Italian manufacturing industry: two violent recessions between 2008 and 2012 have caused large and prolonged shrinkage in output, bringing under a significant number of concerns, production divisions and job positions.
While in the first quarter of 2013 GDP was 8.6% lower than its peak before the crisis in 2007, industrial production shrank by 15%! The crisis seems to have already devastated 15% of Italy’s manufacturing potential.
Particularly negative looks the rate of consumption by families: the recession which began in the third quarter of 2011 brought 2013 to a close with 6.6% shrinkage.
Any reversal in trends to the current recessive cycle of domestic consumption is expected to take a long time due to the high number of unemployed. For the moment, any recovery is dependent on exports. In any case, Confindustria also foresees a slow recovery during the course of 2014.
Italy’s GDP is estimated to have ended 2013 with -1.7% growth; for 2014, a trend reversal is expected to bring 0.7% growth, but in the face of approximately 8% average shrinkage from 2008 to 2013.
Expectations for Europe in 2014 are oriented toward a slow but progressive recovery, whose first signs are focused for the moment only in Germany, France and Spain.
According to Prometeia, during 2013, Italian manufacturing has continued to suffer the consequences of reduced domestic demand (-3.8%), which has contributed decisively to the sustained drop in production (an overall slowdown of 3.5% at constant prices, following 6.5% shrinkage in 2012). Exports recovered slightly (+0.3%), while imports shrunk by 2.5%.
For 2014, Prometeia foresees a slow but sustained recovery driven mainly by exports, which should raise manufacturing output by 1.7%. However, this is still far from pre-crisis values, since manufacturing shrunk by 10% from 2011 to 2013.
The chances of a firm footing for a recovery during 2014 will not however be up to concerns, since more political stability, a balanced public budget and progressive freeing up of credit will be essential.

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

A cura di Plinio Iascone