US paper mills are scaling back production as big-box retailers buy less cardboard, signaling a slowdown in consumer spending.
Cardboard boxes are present at nearly every step of a good’s journey through the supply chain, which makes the paper industry a key indicator of how consumer demand is faring. The US corrugated products industry is reporting slumping sales, with shipments of empty boxes in March down 11% from a year earlier.
Integrity Fiber Supply, an Indiana-based paper products maker and recycler, is seeing the shift first-hand, according to one of its commodity traders. Kyle Risinger said at last week’s Commodity Trading Week Americas event in Chicago that manufacturing is down because inflation is curbing consumer spending, hurting demand.
“When things are good and everything is running solidly, the mills are running at about 90% to 92%, making paper and packaging,” Risinger said Thursday in a panel discussion. “Right now, since the beginning of the year, they’re about 70% capacity.”
The packaging world, according to Risinger, is the “front door” to observing the direction of the economy — and he sees the signs pointing to a consumer slowdown.