Bank of America stated that the so-called "decline of cardboard boxes" is about to end as packaging prices rise.
Bank of America stated that packaging prices are about to rebound, marking the end of the US "cardboard box decline".
Despite negative industry data since the second half of 2022, the bank's new survey shows a soaring growth prospect for the corrugated packaging industry in the next few quarters. This is good news for the overall US economy because at least one leading recession indicator is starting to improve. When the demand for cardboard boxes fell to its lowest level since 2009 last year, analysts were worried that this meant a significant contraction in consumer spending.
Demand for cardboard boxes is a frequently overlooked indicator of economic health and they are an important component of consumer spending, whether it's e-commerce or shipping bulk goods to stores. Throughout the US economy's recent economic recessions, the phenomenon of the "cardboard box decline" has almost always first lit up the "red light" before the economy enters a recession.
In June of last year, Charles Schwab announced that the US had entered a "cardboard box decline" and warned that this would affect all aspects from the labor market to the stock market.
However, since then, the US economy and markets have generally been on the rise. Consumer spending has remained elastic in recent months, helping US stocks climb to record highs.
Now, the situation in the packaging industry is improving. Bank of America analyst George Staphos said in an interview with Yahoo Finance that the packaging industry has been in decline since the second half of 2022. However, after the survey, they found that growth expectations for the next two quarters have risen sharply among independent corrugated box manufacturers surveyed, so "we have raised our industry growth expectations from 0.6% to over 3%, which I think is very important. In addition, we have heard an overwhelming feeling from respondents that prices will continue to rise."
Bank of America raised the expected growth of the corrugated packaging industry to 3.23%, higher than the long-term average of 1.58%.
Although he admits that this growth is largely due to inflation, Bank of America's survey shows that demand expectations are also playing a role.
The report states that in the next 6 to 12 months, 62% of respondents believe that demand will be "better" or "much better". In contrast, only 39% felt that way in April of this year.