Wood and Paper Manufacturers Right-Size Output

Manufacturers of durable goods have been struggling to match output with demand. Overall, new orders fell 2.6 percent in December, the fifteenth month in a row that the number has declined. Shipments fell as well; they were down one percent in December. Despite lower demand, inventories of durable goods increased to the highest level since 1992.

Wood and paper products companies, however, have not been contributing to these numbers. Wood products output in December was just over half the peak in October 2005. Capacity utilization for wood products industries was 22 percent lower than it was a year earlier. And while the drawdown in output from paper products companies has been more gradual, December’s number was 75 percent of the level reached in February 2000. Capacity utilization among paper manufacturers was 11 percent lower than it was a year earlier.

In January, production and inventories of wood and paper products declined again, a sure sign that these companies are right-sizing output. While some further capacity reduction lies ahead in 2009, these numbers suggest that the wood and paper sectors are in better position to weather the remainder of this "great recession" than those in many other sectors.