Packaging machinery grew in 2003

Economic improvements portend an even stronger 2004

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Thanks to a strong ending to the year, spending on packaging machinery in 2003 is predicted to grow between 1.5-2.5% when all the figures are in. With especially good bookings in the fourth quarter, packaging officials are optimistic for an even better 2004.

Shipments in 2003 may well exceed the earlier $5.084 billion estimate by the Packaging Machinery Manufacturers Institute (PMMI) following its mid-2003 survey. Foods (estimated at a 2-4 percent increase) and beverages (2-3 percent) were among the stars of the forecast. Only pharmaceutical (8-10 percent) and personal care products (6-8 percent) are predicted to have higher growth rates.

The forecast and findings are based on telephone interviews with a representative market sample of 417 decision-makers reporting on the purchasing plans of 1,628 plants throughout all sectors of the domestic market. PMMI notes the estimates are developed "in conjunction with detailed analyses of macroeconomic conditions and market-specific factors and expected developments deemed relevant to the outlook."

If growth is confined to 2 percent, it would be identical to that of 2002. While slightly lagging recent growth rates of 3 percent a year, and far behind the 6 percent jump of 1999, any increase would beat the flat sales of 2000.

"While much of the economic uncertainty that existed then persists today as well, the outlook for 2003 appears to have a firmer footing upon which more solid, longer-term growth can emerge," says the PMMI report. "Five of the eight defined market segments studied (foods, pharmaceuticals, beverages, personal care and household chemicals), which collectively account for over 80 percent of the machinery industry's annual dollar volume, are expected as a group to increase spending by 3.2-4.9 percent. If not for the predicted decline in demand from two market segments , durables/ hard goods (-8,-10 percent) and paper, textiles/soft goods (-10,-12 percent) , as well as zero growth from the converters and "all other" segment, the aggregate outlook would be considerably brighter."

A larger number of companies (33 percent) planned to increase spending for packaging machinery in 2003 than reduce spending (27 percent), while 34 percent were budgeting about the same as in 2002. That's a marked improvement over last year's results, in which the number planning to reduce expenditures held a slight edge.

"In spite of the selective optimism of the forecast, the findings revealed a considerable amount of inertia in the marketplace, as economic and geopolitical concerns continue to influence customers' capital expenditure planning. It appears that the overwhelming uncertainty is not only limiting the potential for higher spending growth, but is also hampering the ability of respondents to forecast expenditures as precisely as they had during less volatile periods," the report concludes.

"The general sentiment emanating from the sample's response reflects a concerted reluctance to spend more for new machinery than vitally necessary until the turbulence of events subsides," the survey states. "This is reflected in the finding that 45 percent of the sample's 2003 spending for machinery will be devoted to the replacement of existing machinery, and 55 percent for additions. During expansionary, less volatile periods, the share represented by additions is typically much higher.

"But after two years of lackluster spending for packaging machinery, the replacement cycle has been extended to a point at which customers will have to replace older machines with new models in order to remain competitive and increase productivity," the report continues. "The longer the cycle extends, the harder it will be for end users to further delay decisions for machinery replacement."

 

Packaging Orders by Market

   
 

Forecast Growth for 2003

Estimated Spending (millions of dollars)

Beverages

+2-3%

921

Chemical Products

+2-3%

312

Durable Hard Goods

-8 - -10%

370

Converters, Printers

0

156

Foods

+2-4%

2,062

Paper Products, Soft Goods

-10 - -12%

294

Personal Care

+6-8%

321

Pharmaceutical/Medical

+8-10%

648

Totals

+1.8%

5,084

Source: PMMI

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