Corrugated Box Shipments (A Leading Economic Indicator) Up in April

On its conference call Tuesday, the Chairman and CEO of Packaging Corp stated that orders for corrugated boxes have risen substantially thus far in April.

Our domestic containerboard shipments were down 18 thousand tons and export shipments were down 19 thousand tons compared to the first quarter of 2008. Our pure corrugated product shipments were down about 50 thousand tons or 12.6% and with one less work day this quarter, down 11.2% on a per work day basis compared to last year’s first quarter. ...

More importantly, April has started out much stronger for us with corrugated products bookings for the first ten days up almost 15% over March, and about equal with April, 2008 [emphasis added]. Shipments for the first ten days are up about 6.5% over March and are down less than 6% compared to last April. And usually billings will catch up with bookings over the course of the month, so starting up with billings up – excuse me, bookings up 15% is very, very positive for us. And this is really the first big pickup in demand that we’ve seen since September [emphasis added] and hopefully it will continue.

Corrugated boxes are used to ship goods. The demand for corrugated boxes is a leading indicator of the economy. There are a lot of people fighting this rally, and there are many dismissing or even mocking the idea that green shoots are springing up in the economy, but I think the economy is slowly repairing itself.

The playbook from which I am operating is that the economy is close to a bottom and is re-calibrating at a lower level. Inventories are low, and we will see a sharper than expected build in inventories some time over the next few quarters, leading to GDP growth that will surprise on the upside.

Many will come out of the woodwork to proclaim the recession over. And technically, they may be correct. However, there are still deep problems in the economy. After the inventory build, there will be a period of disappointing growth, and the economy may slip back into recession thereafter.

I believe that this current market rally is a reflection of what is unfolding in the economy. We are overbought in the near-term and are due for a pullback, but we could go a lot higher than many expect. After the rally, I think the market will fall substantially but I believe it will not hit a new low.

The purpose of the market is to mess with the most people most of the time. At extremes, it will move hard against the way the market is leaning. And right now, the market is leaning hard against this rally.

I have never been in an environment where the Zeitgeist of the market was so overwhelmingly lopsided, including the insane Tech Bubble of the late 1990s. At the extremes, the crowd is always wrong. I see no reason to think why it will be any different this time.

Comments

[johngonole:]

I main thing I agree with is that markets are unpredictable. When everyone is thinking the same thing will happen it probably will. I just don't know if I agree that people are leaning so heavy against a rally. I think generally people feel that the economy is bad and most think it might get worse. Still stocks are cheap. How the whole heard makes sense from that I don't know. If we hit 8600 I'll sell some stocks. Otherwise I'll hold and wait to buy more around sub 7500.

I've been investing in stock since 1998. All my money has been made buying low and selling high. GD has really been my only long term successfull hold. It seems the longer I hold the more likely I am to lose money. I know this is contrary to popular thought but I think when people are talking about single stocks the long term risk is higher than the short term risk. Its easier to predict 6 months out then 5 years out. On the otherhand when talking about indexes I still think long term risk is lower than short term risk.

Thus I recommend buying stocks during this period that look dirt cheap. Take your profit and find another one. Forget trying to trade the whole market. Its just too crazy.

Apr 23 03:37 AM

[Old Trader:]

Perhaps the increase in cardboard boxes is due to demand for housing by homeowners who've been foreclosed on, and will soon be seen under a viaduct near you....

Apr 23 09:18 AM

[shootpar2001:]

Some clarity on cardboard boxes........

My brother works for Int'l Paper.
They have been running boxes for long term customers; months in advance. Also some of the pick-up; is customers beating them up on pricing. They are working 5 days one week, 2 days the next.
This previous indicator is slightly skewed at this point.
Just a little factual info here.



On Apr 23 09:18 AM old trader wrote:

> Perhaps the increase in cardboard boxes is due to demand for housing
> by homeowners who've been foreclosed on, and will soon be seen under
> a viaduct near you....

Apr 23 11:21 AM

[TheSnail:]

Thanks for the props.

Richard Geist

Apr 23 03:10 PM

[Eric Fox:]

What have other companies said about trends in Corrugated Box Shipments?

Apr 23 05:48 PM

[dcb:]

good article. Gives me a different approach.

Apr 23 05:54 PM

[User 440692:]

Yea, China ships a lot of boxes --their economy is still growing. Buying boxes made in China is a big, big business.

Jul 04 09:31 PM