Report on the state of packaging – November 2015

Four-month report on the packaging industry as of late November 2015.

Below is an overview of the manufacturing sectors that consume the most packaging, divided into the macro-areas of food and non-food. A report on the packaging sector will follow.The economic outlook of the manufacturing sectors, on the other hand, is taken from sector analyses carried out by trade organizations and by Prometeia.

Food industry (food and beverage)
According to the Istituto Italiano Imballaggio database, the Italian food industry (food & beverage) should have ended 2015 with 2% production growth. This comes after the recessive three-year stretch of 2012-14, mainly driven by dropping domestic demand. That was partly counterbalanced by exports growth.
The two-year period 2016-17 should see progressive strengthening of the recovery: +3% in 2016 and +4% in 2017.

Pharmaceuticals
According to Prometeia, 2015 should have seen +1.8% growth, driven by growing domestic demand (+1.7%) and exports (+3%).
The performance outlook for 2016-17 is mostly positive: +2% annually.
It’s important to note that domestic demand, even during the recession, continued to have a growth trend, basically tied to the progressively aging population and increasing attention to preventive medicine.
 
Fashion industry
After the long recession, according to Prometeia, 2014 saw the start of a modest but progressive recovery. After 2014’s 1.8% production growth, 2015 should be 1.4%.
The medium-term prospects for Italian fashion remains for the most part positive, albeit limited to +1.6% for 2016 and +1.2% average annually for the three-year period 2017-19.
This growth trend does not however allow for recovery of pre-crisis levels.

Cosmetics and perfumes
After ending 2014 with modest production growth (0.8%), thanks to +4.9% exports, against domestic demand shrinking by 1.4%, the sector should have ended 2015 with 4.1% production growth.
Still considering 2015, the recovery was driven mainly by exports, estimated at +4.1%, but imports also show promising growth: approximately +6%.
Early estimates confirm a return to stability for the Italian cosmetics industry, including in the domestic market. According to Cosmetica Italia, the weight of exports remains the significant factor in growth of turnovers and numbers of cosmetic products.
Outlook for 2016 is good.

Furniture and décor
Prometeia estimated that, in 2014, production in the furniture sector resumed growth after a long recessive period, and 2015 confirms this trend, albeit with decidedly modest numbers.
During the thee-year period 2016-19, the fragile recovery expected in the domestic market will not bring about a return to pre-crisis levels.

Chemical products
According to the latest Federchimica numbers, made available in late November, Italian chemical production should have ended 2015 with 1% growth over 2014. Foreign trade ended the year with net export growth (+3.5%) and significant growth in imports (+3%).
The big news of 2015 is an altogether quite gradual recovery of the domestic market, but the recovery appears to now be well on its way.

Mechanics (agricultural machinery, machine tools, machines for special uses, energy machinery)
According to Prometeia, after a long recession, in 2015 this sector should end the year with 1.2% production growth, and slight increases to foreign trade (imports +4.8%).
The growth prospects for the coming years are therefore positive, both following the progressive rise of exports and given the need to update Italian industry’s obsolete equipment.
Packaging of this machinery requires in particular wood packaging and plastic films.

Electric appliances
According to Prometeia’s analysis, 2015 saw modest growth around 0.5%. By contrast, after a long recessive period, domestic consumption ended the year with 2.5% growth, although this mostly benefited import products (+4%).
Exports are ending the year in slight decline.

Building materials
The long recession of construction in Italy is finally showing the first signs of recovery during 2015.
As is known, construction also involves building materials (cement, concrete, bricks, rebar for reinforced concrete, etc.).
During the last six years, the drop in production in this sector has been by 26%, and, in previous years, the trend was certainly not satisfying.
According to an analysis by Prometeia, starting in 2015, the construction sector - and thus also building materials - is set for
a slow recovery, with modest rates: +0.2% in 2015, +1.3% in 2016 and +2% in 2017.          

General economic outlook
According to Confindustria, the state of the global economy as of late 2015 is no longer characterized solely by auspicious factors.

The slowdown of emerging economies, changes to government budgets, and military escalation in Syria have the potential to slow the global recovery, as well as fears surrounding the recent terrorist attacks, which contribute to the already highly uncertain climate in Europe.
In Italy, the economy is struggling to grow. In 2015, the country’s GDP rose over the summer for the third consecutive fiscal quarter, but at a modest rate: +0.4% in the first quarter, +0.3% in the second and +0.2% in the third. The fourth quarter also saw modest growth, and GDP variation in 2015 is expected to be +0.6%. Still considering the year 2015, industrial production has started on a path to slow recovery. The year 2015 should end with a growth rate of 1.5-2%. Table 1 shows projected growth for 2016 in terms of the main economic indicators.

Prometeia summary
Italian manufacturing maintained growth during the mid-year period, in spite of the global downturn during this time.
Deteriorating conditions in international markets was mainly caused by trouble with payments, including in international trade. In fact, trade in goods suffered two consecutive quarters of decline.
Considering the Italian economy, during 2015 the market finally emerged from a long recession. It is therefore set to be a growth driver for the Italian manufacturing industry. In short, Italian manufacturing is expected to conclude 2015 with 1.4% growth in production. Foreign trade should be +2.3% exports and +4.5% imports. Domestic demand should be 1.8%.
According to the latest estimates, 2016 will see a potential strengthening of the recovery, with production growth of 1.9%, with improved growth, exports and domestic demand.

The packaging sector
According to very early analysis, the packaging sector is expected to finish 2015 with 1.4% production growth, in terms of volume, compared to the previous year.
This increase is added to the +1% recorded between 2013 and 2014.
This growth is evidenced by the strong performance of exports (+3%). Imports also grew by +7%, sustaining 0.3% growth of apparent use.
However, the modest growth of packaging (expressed in tonnes) is driven by the rise of plastic packaging, flexible polylaminates for converting in particular, which require less weight than many other container types for the same capacity.

The data used in this analysis are taken from the database of Istituto Italiano Imballaggio
                                                    
Plinio Iascone
Istituto Italiano Imballaggio