Cutting cardboard and the signs it delivers about the economy

Despite resilient stock markets and relatively low unemployment, cracks are forming beneath the surface: job growth is cooling, inflation remains stubborn and retailers are preparing for a weaker holiday season. And a slowdown in cardboard box production could be one of the clearest signs yet that the U.S. economy is bracing for a downturn.

But there are signs that companies are expecting things to go sour. For one, recent forecasts about the upcoming holidays suggest retailers are expecting a drop in shopping leading up to Christmas. One of the biggest signs is neatly packaged, and it has to do with the packaging itself.

“You’re seeing fewer cardboard boxes being ordered,” said Jadrian Wooten, an economics professor at Virginia Tech.

The cardboard industry in the U.S. is massive — about four times bigger than the NFL’s $23 billion in revenue.

This goes way beyond someone ordering a little bit less from Amazon though. It’s thought that about 75-80% of everything that gets sold in stores are shipped in cardboard boxes. The products sitting on those shelves are also often in boxes. But right now, the manufacturing plants that make cardboard are reducing capacity and production at levels not seen since the financial collapse in 2008.

“Cardboard box companies today are shutting down plants or reducing capacity in anticipation of what’s coming ahead in the next couple months,” Wooten said.

But the reverberations are probably bigger than you first imagine — reductions in manufacturing, which then hits the shipping industry and truck drivers, eventually hits the retail industry.

“It’s not just a reduction in the number of boxes showing up at your house,” Wooten said. “It really is coming from boxes that are shipped to stores, boxes that are shipped overseas. And then there’s sort of these knock-on effects. So if we’re not shipping as many things, that’s going to impact the trucking industry, that’s going to impact the shipping industry, that’s going to impact our local stores.”

Most of that demand reduction is likely impacted by holiday shopping and tariffs, which is leading to a reduction in exports.

“What’s happening at a lot of these plants is they’re saying ‘we’re not seeing future increase in demand, we might as well shut some of these down,’” Wooten said. “Some of them are permanent shutdowns. Some of them are temporary shutdowns. But either way, it’s a signal that we’re not going to see future demand at the level that these companies think will justify operating these plants.”

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