Recently, PLA conducted an in-depth analysis of 14 key macroeconomic and industry-specific indicators to assess their influence on pallet demand and pricing, determining the seven most closely tied to changes in the recycled pallet market. Here’s how each of these indicators performed in Q3, what experts are predicting for the balance of the year, and what these results and forecasts can tell us about recent and upcoming pallet market trends.
GDP
GDP, the value of all goods and services produced domestically, is the go-to gauge of our economy’s health. Read more about GDP’s relationship to the pallet market here.
GDP rose 0.7% in Q3 over the prior quarter and 2.9% year-to-date (YTD) over last year for the same period. The economy is growing more than originally thought, with experts upgrading their forecasts to greater than 2% for the full year.
Consumer Spending
Consumer Spending measures the goods and services purchased by people in the U.S. Read more about Consumer Spending’s relationship to the pallet market here.
Consumer spending increased 1.5% in Q3 over the prior quarter and 2.1% YTD over last year for the same period. In their October update, Goldman Sachs upgraded their forecast for Consumer Spending to grow 2.6% in 2024, ahead of earlier predictions closer to 2%.
Retail Sales
Retail Sales and Consumer Spending both track closely with pallet demand and pricing. However, Consumer Spending also includes sales of services, making Retail Sales an even clearer picture of sales of palletized goods and therefore pallet demand. You can read more about this relationship to the pallet market here.
Retail Sales rose 1.3% in Q3 over the prior quarter and 1.9% YTD over last year for the same period. In October, the National Retail Federation forecasted Q4 sales to grow 2.5-3.5% over 2023, a positive sign for our economy as a whole and a sign of increased pallet demand should the trend continue.
Manufacturing Output
Manufacturing output reflects the full value of the supply chain by including the B2B spending necessary to produce and deliver goods. Manufacturing output tracks closely to both pallet demand and pricing, which you can read more about here.
At the time of this publication, Q3 Manufacturing Output had not yet been published. It will be interesting to see if the Fed’s lowering of interest rates helped boost production, as high interest rates are often cited as a leading contributor to lower production. This would further support higher pallet demand for the balance of the year.
Taken together, GDP, Retail Sales, and Manufacturing Output offer good insight into both near- and mid-term pallet market dynamics. Recent upticks and positive forecasts for all three factors likely signal that recycled pallet demand should increase in the coming months.
Freight Pricing
Freight Pricing (specifically, the Producer Price Index for Truck Transportation of Freight) captures the weighted average of prices that trucking companies charge for freight and measures change over time. Read more about how Freight Pricing relates to the pallet market here.
Freight Pricing increased 0.7% in Q3 over the prior quarter but was still 1.7% lower YTD vs. 2023.
Experts’ predictions for the balance of the year are mixed, but most expect pricing to increase as capacity tightens, and significantly higher than 2023. In all, most believe we have seen the bottom of the market and are now rebounding, though recovery will likely take longer than predicted at the beginning of the year. This is similar to general pallet industry sentiments, supporting price stabilization and increases by the end of 2024.
Lumber Pricing
Lumber Pricing (we use the Producer Price Index for Lumber) takes the weighted average of prices that lumber companies charge and measures change over time. Read more about how Lumber Pricing relates to the pallet market here.
Lumber pricing was flat (-0.1%) in Q3 over the prior quarter, down -4.3% lower YTD vs. the same period last year. As prices remain elevated compared to historical norms, experts predict pricing to remain stable through the end of the year and into 2025, fueled by strong housing demand and supply chain disruptions.
OCC/Recycled Paperboard Pricing
OCC Pricing (specifically, Recycled Paperboard) measures the weighted average of prices charged by mills and measures changes over time.
Recycled Paperboard Pricing increased 2.6% in Q3 over the prior quarter, down -3.1% YTD vs. the same period last year. Industry experts predict price increases to continue, due to both delayed recognition of higher input costs and higher current demand. Increased Recycled Paperboard pricing for the rest of this year and into 2025 would generally indicate recycled pallet pricing increases as well.
The combination of Freight, OCC, and Lumber Pricing offer a good gauge of recycled pallet pricing trends we can expect in the mid-term. Two of the three indicators are down vs. prior year, and the third flat, which mirrors what we’ve seen in the recycled pallet market. Moderate increases are expected in the coming months for all three – likely signaling the same for recycled pallet pricing.
Key Takeaways
Taken together, the performance and forecast of these seven indicators suggest the overall health of the economy is stabilizing and expected to improve, increasing demand for recycled pallets. While this would also suggest an uptick in pricing, mixed forecasts for the other, closely correlated industries’ pricing temper this a bit. Pallet users should expect stable pricing for recycled pallets in the near-term, and increased prices in the mid-to long-term.
