24 WESTERN PALLET
New home construction
One bright spot in the economy has been new home construction. Housing starts in May 2023 were the strongest since April 2022, with the highest monthly gain since October 2016. The lack of existing homes on the market has buoyed the strength of the new home market.
Meanwhile, the NAHB/Wells Fargo Index has also shown an uptick at 55 points in June 2023. It is the highest level since July 2022, supported by increased builder confidence, attributed to solid demand, lack of existing inventory and improved supply chain efficiency.
Doug Duncan, vice president and chief economist at Fannie May, expects the strength of the housing market to soften the recession and aid in recovery in 2024.
Unemployment
“Overall, the labor market continues to be solid but higher claims do foreshadow potential cooling off in the labor market moving forward,” he said, remarking that pallet companies are reporting that it has been a little bit easier to find people. One of the key issues will be how to retain key employees during the downturn.
Pallet industry outlook
The webinar also included a poll question about when attendees anticipated a recovery. While 39% of respondents anticipate recovery later this year, the other 61% do not expect things to improve until 2024 or beyond. Those responses somewhat mirror the opinions of economic prognosticators who are projecting recovery until next year. They are shown below:
3Q 2023
4Q 2023
1H 2024
2H 2024
2025 & beyond - 12%
The final poll questions pertained to changing pallet buyer behavior. The leading trend reported was increased RFQs, followed by more last-minute purchases.
Implications for the pallet industry
Brindley discussed several implications that the current economy is having on the pallet industry. These included:
- Increased competition, aggressive
sales, and price cutting
- No major seasonal holiday bump this
year
- Customers will be switching from
new 48x40” to #1 recycled
Core buyers will be more selective about the core quality they will accept from core emitters.
Markets for poor-quality pallets will be very soft.
Lower margins could impact the viability of newer pallet brokers in the market.
Pressured pallet providers will need to find new opportunities to cut costs.
Downtimes present an excellent opportunity to work on systems, automation, OSHA programs, and more.
M&A activity has slowed and will continue to be slower as players become more strategic about further acquisitions.
Data is critical to knowing costs, managing inventory, and leveraging customer relationships.
Ripple Effect
Cont'd from Page 23