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PMMI expects growth in machine spending

Packaging machinery spending by U.S. manufacturers this year will likely rise by up to 3% more than it did in 1997. Strong investment is expected from personal care and household/industrial chemical markets.

Figure A
Figure A

Seven out of 10 manufacturers/packagers plan to spend as much or more this year on packaging machinery as they did in 1997. However, declining spending by the other 30% of manufacturers will offset those gains to the point where domestic equipment outlays will rise between 1% and 3%.

That's according to survey findings released in June by the Packaging Machinery Manufacturers Institute (Arlington, VA). Research for the 1998 PMMI Customer Purchasing Plans Study was conducted by Madison, CT-based Industrial Research Associates, a firm that also administers PMMI's annual Shipments & Outlooks Study.

This study's principal objectives were to: (1) assess the outlook for packaging machinery spending in 1998 by packagers in the U.S. domestic market, (2) examine factors that will influence the expected level of demand, and (3) evaluate trends affecting the market. Survey findings were based on 364 telephone interviews conducted, says the association, "with decision-makers from essentially all sectors of the market."

Many of the 364 interviewees' comments represented plans for multiple locations or company-wide spending expectations. In all, PMMI says, the information from these respondents represented data relative to 1극 plants. That sample was selected to approximate all principal market segments where packaging machinery is sold, according to PMMI. Telephone and mail interviews were conducted between December '97 and March '98.

"This is the first year we have done this in-depth purchasing research," notes PMMI president Charles D. Yuska. "Our research indicates continued growth and investment in packaging machinery as companies look for ways to increase productivity while controlling costs."

Of the 364 respondents, 37.4% expect to spend the same amount for equipment this year as last, while one in three (33.7%) plans to increase machinery expenditures in '98. Less spending was anticipated by 28.9% of respondents.

Nearly four in 10 respondents were from a category described as "Food and Food Preparations." Beverages (11.8%) and Pharmaceuticals and Medical (10.7%) represented the next largest groups of respondents (see Figure A).

Market inconsistency

"Although the findings clearly revealed pockets of strong growth in machinery demand, they also uncovered elements of both declining demand and a leveling off in the rate of machinery acquisitions. The net result suggests that compared with last year, the 1998 market will continue to grow, but at clearly a less robust pace," says the report.

The personal care market is expected to provide the strongest spending this year. Manufacturers predicted outlays in the range of 7% to 12%. Household and industrial chemical producers planned increases of 5% to 10%, followed by makers of hardware, industrial and automotive components, at 5%.

Beverage packers, however, plan to cut spending for packaging equipment between 4% and 9% compared to '97. PMMI says this segment is typically responsible for about 14% of annual machinery shipments. Pharmaceutical makers expect investment at last year's levels, "but with an upward bias," says PMMI. It reports that the pharmaceutical/medical manufacturers spent heavily last year in anticipation of higher '98 production requirements.

When asked for its goals in ordering packaging machinery this year, respondents most often cited the need to expand production/packaging capacity (31.4%). Another 16.7% needed to replace older machinery to boost efficiency; 9.1% said the lifecycle of existing machinery necessitated immediate replacement; and 8.5% expected to reduce labor costs through equipment purchases.

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