Mild Recovery Has Begun: PMMI Report

The United States is in the early stages of a mild recovery, according to the quarterly economic outlook report released by the Packaging Machinery Manufacturers Institute (PMMI).

The report reveals a positive macroeconomic outlook for 2010, despite a dampening in consumer confidence resulting from the current unemployment rate of 10%.

In October, the industrial production index reached a low point, ending its worst economic downturn since 1946. Now, most industries are showing increasing activity, and the rate of decline is slowing in others, according to PMMI.

Markets with positive outlooks include: pharmaceutical and medical devices production; personal care products production; beverages, coffee and tea production; chemical and cleaning and finishing products, household and industrial; consumer/commercial industrial durables, hard goods, components and parts; and food and food preparation production.

The U.S. leading indicator index has posted its 10th straight month of increases, taking it to a record high, PMMI states. The year-over-year reading is above zero, and the rise in the index supports the outlook for increasing activity in the U.S. economy in 2010.

The Institute for Supply Management’s (ISM) Purchasing Managers Index (PMI) reached 58.4 in January and grew to 59.6 in March. January was the indicator’s sixth consecutive month above 50, indicating six months of expansion in the manufacturing sector.

PMMI also reports that retail sales (not including automobiles) are showing signs of stabilizing. Although sales dropped 3% overall in 2009, holiday spending saw its first year-over-year increase (0.4%) since 2006. A mild November to December rise shows that the retail sector is still weak but that the worst of the decline is probably over.

However, PMMI cautions that the downward trend in corporate bond prices, if it continues, may cause long-term interest rates to become problematic as early as 2011.

PMMI adds that nonresidential construction is set to move lower through 2010, but as a generally lagging indicator, the trend is considered normal. The companies with the most exposure to the nonresidential construction sector will have a difficult time increasing production levels in 2010, PMMI predicts, as it forecasts a flat year in consumer/commercial industrial durables, hard goods, components and parts.

Total U.S. packaging machinery shipments declined throughout 2008. As U.S. industrial production continues to improve in 2010, packaging machinery shipments will also likely see some advancement, according to PMMI.

The association also reports that new orders in nondefense capital goods are transitioning into “Phase A: Recovery,” suggesting that packaging machinery shipments will see improving economic conditions in 2010.

Finally, PMMI expects the dollar to continue to strengthen against the euro in 2010. While a strengthening dollar is not favorable for packaging machinery exports, PMMI notes, economic recovery occurring in overseas markets should help compensate for losses in exports.

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