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Economic indicator: Look inside the cardboard box

NEW YORK

Whether it's a Big Mac or a Mac computer, nearly everything comes in a cardboard box. So if you want to gauge whether people are eating more, buying more clothes, loading tunes on a new iPod or upgrading their computer equipment — in other words, whether they're spending money — it makes sense to track how many cardboard boxes are shipped each month. That's why — besides crunching numbers on the output of durable goods, auto sales and housing starts — economic experts track shipments of corrugated boxes, containers made of cardboard, paperboard or heavy-duty paper. And lately those boxes haven't contained a lot of good news about the economy. Here are some questions and answers about corrugated box figures and why they are important to the economy.

Where do corrugated box shipment figures come from?

The monthly figures are collected by a trade group called the Fibre Box Association. Around the middle of every month it reports how many corrugated containers its industry shipped.

Those numbers are important enough that economists at the Federal Reserve use them, among many other statistics, when they compile reports on the nation's industrial output.

What can these numbers tell us about our economy?

Everything from tubes of toothpaste and bottles of aspirin to cat litter and breakfast cereal usually gets shipped in corrugated containers. An increase in shipments of cardboard boxes suggests that factories are looking to ship more goods, which means retailers are ordering more stuff — which usually happens because customers are making purchases. And that's good news for an economy that depends heavily on consumer spending for growth.

Conversely, a decrease in box shipments is bad news for the economy, because it means manufacturers face lower demand from retailers — and, in turn, from the public.

Are corrugated box shipment figures a good predictor of where the economy is heading?

Some experts think they offer a good sign of what's to come — a "leading indicator," as economists say. Others see them as a "coincident indicator," meaning that an increase in the figures happens at the same time that the overall economy is improving, not before a recovery.

Either way, many experts find the numbers to be useful as they assess the economy.

What are the latest cardboard shipment figures telling us about our economy?

The patient is still sick — and no sign of recovery has shown up in the box numbers so far.

According to the Fibre Box Association, shipments fell 3.5 percent in the second quarter of last year, compared with a year earlier. Then they fell 3.3 percent in the third quarter. After that, the bottom fell out: Shipments fell 9.9 percent in the fourth quarter compared with a year earlier.

This year corrugated box shipments have fallen, on a year-over-year basis, 5.1 percent in January and 8.3 percent in February. The numbers for March will be out in mid April.

"There has been no improvement relative to the previous three months," Longbow Research analyst Joshua Zaret said. "March should show some seasonal improvement within a context of weak overall demand, but these are very poor numbers."

Economic indicator: Look inside the cardboard box 04/07/09 [Last modified: Tuesday, April 7, 2009 10:01pm]
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