Little Growth Seen for 2008 Packaging Automation Spending

Consumer goods companies continue buying, but grow cautious about economic conditions.


Consumer and industrial goods companies plan on spending approximately $6.3 billion for packaging machinery in 2008, a 0.6 percent increase in spending over 2007 levels, according to a recent report from the Packaging Machinery Manufacturing Institute (PMMI), an Arlington, Va.-based trade association.

PMMI’s 2008 U.S. Packaging Machinery Purchasing Plans Study notes only two of eight tracked market segments will show growth: foods, up 2 percent to 4 percent; and personal care products, up 0 percent to 2 percent. The remaining six categories will show moderate declines, but with slight potential for growth: beverages (-1 percent to -3 percent), pharmaceuticals (0 percent to -2 percent), personal care products (0 percent to -2 percent), chemicals (-1 percent to +1 percent), consumer, commercial and industrial durables/hard goods (-1 percent to +1 percent), paper products, textiles and other non-durables (-1 percent to -3 percent).

“PMMI members’ customers reported they are holding steady with their packaging machinery spending plans for 2008, despite weakening economic conditions,” noted Charles D. Yuska, PMMI president and chief executive officer. “With 85 percent of the respondents expecting to buy roughly the same amount or more than they did in 2007, we expect some market segments to be fine, with other groups feeling a tightening as consumer goods companies wait out the current economic quarter.”

The PMMI 2008 Packaging Machinery Purchasing Plans Study is based on interviews with 511 decision-makers responding for 1,564 plants in the United States.

Reasons to buy

Respondents cited the following as deciding factors in making purchasing decisions:
  • Replacing older equipment to improve speed, productivity, efficiency (39.8 percent)
  • Adding new packaging machinery to accommodate new products (36.2 percent)
  • Adding new packaging lines to increase production (35.3 percent)
  • Adding packaging line automation (34.4 percent)
  • Replacing older equipment to improve uptime, reliability, maintenance costs (32.6 percent).

“Even with difficult economic conditions triggering fewer decisions to buy, we expect companies will see the strong value in replacing older equipment to ensure they maximize production capacity and ultimately lower costs,” added Yuska. “We are confident that PMMI member companies are positioned well to weather the current economic conditions given the strong value propositions they deliver in the areas of reliability, productivity and solutions focus, all important buying criteria for today’s consumer and industrial goods companies.”

Macroeconomic assumptions

The primary macroeconomic assumptions that underlie this study’s predictions include:

  • U.S. 2008 gross domestic product real growth is forecast at 1 to 2 percent, with most gains accruing in the second half of the year.
  • Capacity utilization rates at U.S. manufacturing plants held fairly steady, spending the bulk of 2007 in the 80 percent range, but began trending slightly lower in the final months of the year. Food manufacturers consistently maintained high utilization rates of 84 percent to 86 percent throughout the year.
  • Weaker consumer spending: Consumers will likely continue to tighten their wallets in 2008 because of difficult credit conditions, falling home prices and higher food and energy costs.
  • Export conditions for U.S. businesses are expected to remain strong, giving U.S. manufacturers with a global sales reach the ability to capitalize on the combination of the weak U.S. dollar and solid growth opportunities in emerging foreign markets.

 

The 2008 U.S. Packaging Machinery Purchasing Plans Study is free to PMMI members and available to non-PMMI members for $1,500. To order or learn more, contact Paula Feldman, director of research and surveys, PMMI: pfeldman@pmmi.org or 703.243.8555.

Packaging Machinery Manufacturers Institute
www.pmmi.org

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