Timer suggests modest recovery.(THROUGH SUMMER MONTHS)

Credit problems in the Euro zone, combined with disappointing economic news in the U.S., have raised doubts about the economic recovery here. The Timer (red line on the chart) suggests that it is too soon to give up on a recovery forecast. It recovered in May after a decline in April and is comfortably above 1.0, the critical value for a directional change. Since the Timer has a four-month lead on the pace of shipments, the May figure is plotted in September. New orders for both consumer goods and business equipment rose in May, as did building permits for new houses. The Fed's easy money policy contributed to a modest gain in the total money supply after adjustment for higher inflation rates. Even consumer confidence held up fairly well in May. But early indications suggest some weakening in June.

The momentum in box shipments slowed in May (blue line) but remains slightly above the 1.0 mark. The shipments calculation is designed to show momentum and give an early indication of a change in direction. It is defined as the ratio of shipments in any given month to the average in the preceding six months. The Timer suggests that the trend in shipments will tilt upward through the summer months.

Technical Note: Changes in the customer industrial base for corrugated boxes, combined with altered behavior within each industry, has changed the monthly pattern of shipments over time. Our most recent update shows some significant shifts in the monthly demand for corrugated boxes since 2006. More Internet sales and continued reliance on just-in-time inventories, for example, have tended to reduce seasonal swings in shipments. December is now less important than in the past; the first three months of the year have lost some share. April, September, October, and November are now more important than they used to be. The net result is that there is now less variation in the monthly shipments than there used to be. The chart reflects the use of these altered seasonal factors for shipments.

By Norma Pace

Contributing Author