U.S. PACKAGING MACHINERY GROWTH PREDICTED FOR 2006

The Packaging Machinery Manufacturers Institute (PMMI) predicts a 3% growth in packaging machinery sales in the United States to an estimated $5.854 billion. PMMI's U.S. Purchasing Plans Study represents the collective voice of 446 decision makers responsible for 8,339 packaging lines in 1,123 plants throughout eight key segments of the U.S. market.

This will be the fifth consecutive year following the economic downturn experienced in 2001 in which domestic demand will increase.

Much of the continued strength can be attributed to sustained growth of the U.S. economy, strong cash positions held by corporations and improved rates of capacity utilization. Another significant factor for growth is the ongoing effort by manufacturing organizations to reduce costs and improve productivity by expanding packaging line automation and installing the latest in high technology equipment.

“Machinery purchasers recognize the inherent benefit of incorporating the latest packaging technology into their lines in order to strengthen their existing operations,” noted Charles D. Yuska, president, PMMI. “Whether the reason is reducing maintenance costs, increasing line speeds or raising productivity, packaging machinery end users are looking for innovation from PMMI member companies.”

Five of the eight market segments defined in the study are expected to increase expenditures for packaging machinery this year. The largest increase in spending is predicted to come from the personal care products segment (10-12%) followed by beverages (6-8%) and converters, printers and all other (6-8%). The other segments looking to increase spending are food (2-3%) and pharmaceutical/medical (1-3%). The study indicates that 62% of the respondents plan to either increase their spending or keep expenditures at their 2005 level.

Macroeconomic Assumptions
The assessment of prospects for the U.S. economy and capital spending in 2006 are based largely on analyses of several groups of economic data in combination with the current consensus of economic forecasts. To that end, the purchasing plans forecasts reflect the following macroeconomic assumptions:

U.S. 2006 gross domestic product (GDP) real growth of +2.9 to +3.4 percent
Capacity utilization by U.S. manufacturers to edge slightly higher in 2006 – As of February 2006, capacity utilization for non-durable manufacturing stood at 81.5%, including 84.1% for the food industry U.S. capital spending to grow this year – All indications point to a meaningful increase in aggregate capital spending for 2006.

Interest rates to continue rising from current (February, March 2006) levels through the year, with the prime exceeding 8.2% and the 10-year Treasury 5.5% Consumer spending to taper off in the second half as the effects of higher interest rates, higher oil prices, negative savings and a weekend real estate market take their toll Corporate profits to continue higher, but at a slightly slower pace than in 2005.

Key Market Drivers
In addition to the macro economic assumptions that are driving an increase in capital equipment spending in 2006, the end users surveyed also indicated several market specific factors, trends and expected developments seen as contributing to growth in packaging machinery sales this year.

These include:

End-users’ optimism about the economy likely to spur investment in machinery

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