Slower growth, continued expansion seen in 1995

Published: February 01, 1995

The Fed is expected to ratchet up interest rates but not enough to trigger recession. Positive forces outweigh the negatives, according to a chief economist who has been following the converting industry for many years.

Slower economic growth with mildly faster inflation and higher interest rates are forecast by Richard A. Stuckey, former chief economist of the Du Pont Co., Wilmington, DE, who retired Dec. 31, 1994, after 41 years with the company.

"I can't think of a set of conditions that would change that prospect," he said. "There are some who believe the economy won't slow down, but it will. It's just too soon to expect it. They think interest rates aren't operative like they used to be, but the economy is still sensitive to interest rates."

Stuckey said the economy is showing persistent growth in the face of rising interest rates because stronger sectors, accelerating exports and capital spending are offsetting weaker sectors.

At the same time, he said interest rates have risen enough to flatten housing but "short-term interest rates haven't gone up high enough yet to get people out of the marketplace who are using adjustable rate mortgages." Thirty-year fixed mortgages have risen from about 6.8% to 9.2%. "Adjustable rates won't go higher, unless all short-term rates go sharply higher. And, they're going to," he said.

"To slow us down, consumer spending must be reduced to offset the influence of capital spending and exports. The economy continues to grow in the moving average sense, at 3.5%, and now that the unemployment rate is below 6% and capacity utilization is around 85%, approaching historic utilization rates in some industries, incipient inflation clearly is appearing. There is no doubt in my mind that interest rates should go sharply higher," Stuckey said.

He expects the prime rate will rise up to 9.75% by December 1995 and could approach 10%. Mortgage rates may well go up to 9.5% or 9.75% next year.

The issue is how much the economy will slow down. "I think certainly you can slow down the economy to such a degree that it becomes vulnerable to recession," Stuckey said. "But interest rates aren't all that high now, relative to inflation. They assure a slow down, yes, trigger a recession, no.

"We have a sufficient piece of the economy that isn't interest-rate sensitive and, therefore, doesn't respond to the rise in interest rates," he said. "But, there are parts of the economy that are sensitive to those rates and that affects jobs and income. Therefore, the level of slowdown depends on how much inventories are built now and how much of a correction in production will be necessitated by the slowdown and by demand."

At the same time, high interest rates make the economy vulnerable to something else. "In the last four recessions, something has been a supply shock: sharply higher oil prices," he said. "People paid more to heat or cool their homes. They paid more for gasoline to run their cars. That meant they had less money for other things and inventories. Factories cut employment. This created a cascading effect, which in turn, caused an inventory cycle and a capital cycle."

Stuckey explained the 11% interest rate in 1989 couldn't have caused the 1990-1991 recession by itself. It was caused by a combination of the inflation rate and a supply shock; namely, sharply higher oil prices associated with the Persian Gulf. "That's when we got that short, mild recession in late 1990 and early 1991," he said.

"The economy is still sensitive to interest rates," he said. "But there are long lags. And the Fed is made up of people. They're impatient and the financial institutions are impatient. This impatience is a cyclical event and so interest rates are going to go higher until we see the whites of their eyes in a slowdown." Stuckey believes unless we have a shock like the one in 1989, "the interest rates I'm talking about will slow us down and give us a soft landing."

He defines a soft landing as an economy that will grow sluggishly for a while. Consequently, the Fed will reduce interest rates and the economy will begin to grow again. Soft landing necessarily means a relatively slow level of job creation and probably a little higher unemployment.

Stuckey expects 1995 will be a year of slow growth, particularly in the second half. "Meanwhile we have something going for us that we haven't hid in a few years, re-accelerating exports," he said. "They're 12% gross domestic product. And I see a global expansion that is relatively impressive. Europe is out of its recession and the output level there is now back to its prerecession peak. Japan is still kind of an iffy thing, but it looks like it's in a sustainable upturn, up from a relatively low trough.

"Elsewhere in the world, Venezuela is in recession and will remain in it in 1995, Brazil's economy is doing very well and should continue to improve if they sustain their real, pegging it to the dollar, which should help keep their inflation at 40% or 50% instead of the 4,000% it was in May. Growth in Brazil is going to be impressive, and if they privatize as they claim, it will be better. Brazil will become like Argentina and Mexico," he said.

Stuckey said Canada is having its best growth in a long time and Mexico has come out of its slump. Asia-Pacific has been suppressed by weakness in Japan but the rest of that region has been growing by 7% a year.

"1995 is going to be the best year, globally, in quite a few," he said. "This is despite some slow down in all English-speaking countries where expansion began sooner than in the rest of the world, and therefore, slowdown is normal."

This leaves inflation.

"The Fed fears inflation and being accused of not being ahead of the inflation curve," Stuckey said. "So they raise interest rates, and you take a severe wealth loss in the stock and bond market. The Fed is looking at high and rising factory-utilization rates. They're looking at surging industrial raw-commodity prices. But much of what they are looking at are fears. Are we not at the early stage of a wage/price cycle? Are we not beginning an inventory boom-bust cycle? Are we not entering a global-growth mode? I think that all three factors are the right places to look for trouble, but I think they perceive more trouble than exists."

Some increase in wage-rate gains is to be expected because they have been suppressed and haven't risen as fast as inflation. "Hourly earnings are still going up only 2.5% or so on a year-to-year basis. "The unemployment rate is 5.8%, but we have a labor pool that is scared to death for its job security. You feel great you have a job and you don't worry about the next increase. The labor pool also has a large number of part-time workers and a large number who are underemployed in the sense that they're overskilled for the jobs they have. This won't prevent some acceleration in wage increases, but those factors are going to mute that rise."

At the same time, consumer spending is reaccelerating. "It surged last year thanks to sales of motor vehicles, home furnishings and equipment. Then it flattened. "This year, retail sales reaccelerated. In October, retail sales increased 1.1%, adjusted for inflation, and were rising at a 6% annual rate above the third-quarter average. This surge was supported by refinancing mortgages, drawing down savings, leasing of motor vehicles, home equity loans, a big pickup in installment credit and job creation. Even the manufacturing sector is adding jobs now, where before the jobs were in the service sector. We have only a little job creation, but it's still enough to maintain consumer confidence."

Another factor that helps prevent inflation is what Stuckey called a disinflation mentality at the manufacturing and retail levels. He maintains that people don't want to pay higher prices; they will look for the best buy as long as they can. "This tactic becomes less effective as time goes along but it's a factor in damping inflation," he said.

The same thing is true of inventories, "The Fed's concern is 60% of the rise in gross domestic product in the second quarter was due to inventory accumulation. But they don't see that inventory has been inadequate for three years. Inventory-sales ratios have reached all-time lows. There's been no increase in manufacturing inventories except at raw-material levels. Although industrial raw-commodity prices are now 20% above a year ago, they fell for five consecutive years. And on average they aren't back to the 1988-1989 level. Nevertheless, they're a factor in boosting costs. But production costs are much more attuned to employment costs.

"As interest rates rise, neither the Fed nor the banking system is monetizing debt," Stuckey said. "The money aggregates aren't rising, which avoids that historic era of too much money chasing too few goods. What's happening is money creation is fostering growth and not inflation. Furthermore, we have global competition and a slow inflation in most other nations in the world. I look at both sides of that inflation equation and I say there are some incipient forces of inflation that are real, but there are countervailing forces. All these conflicting forces say to me the consumer price index this year will be 2.8. Next year, I expect anywhere between 3.25 and 3.5."

Stuckey predicts inflation will grow faster this year than it did last year. "The honest discussion is how much faster. Inflation at a rate of 2.5% to 3% in calendar 1995 can be supported."

The value produced by an economic system is becoming less countable in a unit sense. You no longer can count everything in units of measure like tons of steel, cars produced, or gallons of paint. You're getting into service areas that are difficult to quantify except through value terms, dollars. Internet uses computers, faxes and e-mail that do away with the US Postal Service. How valuable is that electronic service? Can you measure the value of a computer? Today's personal computer is as the old vacuum tube computer of 30 years ago that required tons of air conditioning to keep the tubes cool. How can you assign a value to the personal computer that sits on your desk? We need to do it, but we're aware there are a number of guesstimates associated with it. More of our system is going to be like that and less in terms of counts of refrigerators and cars and tons of steel and barrels of oil. These will always be there, but more and more of our system is a value especially when it comes to services.

The General Agreements on Tariffs and Trade (GATT) will have a net positive impact. "The problem is lowering trade barriers will cause some economic pain," Stuckey said. "It's not limited to borders. There's no question there will be product failures, job losses here and elsewhere, and these kinds of things. In the US, where we're high technology with a work force that's higher skilled, we have an advantage. Those who have lower skills in a lower technology don't have it. Some of that low tech work may leave the US and go to other countries. And as global trade increases, those lower-skilled people can improve economically and rise up to the next tier of skill and standard of living. This puts a high premium on education.

"Trade depends on who has the comparative advantage and skill to produce the capital good with respect to the economy's needs. Exports of goods and services are now 12% of our gross domestic product. This means jobs. Our biggest export is in capital equipment. Chemicals have a $16-17 billion trade surplus. Agriculture exports take advantage of our land and weather. At the same time, we import a lot of capital equipment and consumer products. We generally import products that tend to have less value added and often are the kinds of things that aren't available domestically and that we need to balance our system," Stuckey said. "That includes about $35 billion in textiles and apparel. We have an import bill of $35 billion for oil, plus a similar amount for automotive parts and assembled cars.

"The global market is five trillion people," Stuckey said. "As they begin to evolve market systems, understand private property and private ownership, their standard of living and income thresholds go up and they want more of what the other part of the world produces rather than just what they can produce. Thanks to communication networks you just can't keep a corner of the world downtrodden for very long. There are too many TVs and faxes and computers that let people know what's going on elsewhere and they get unhappy when their personal set of circumstances don't measure up to what the rest of the world has.

"There are too many things we need to do down through time to subtly force us away from the retail counter and to save more," Stuckey said. "That's the solution to our trade deficit. We overconsume relative to what we save. It's that simple. You can't get rid of the deficit until you deal with the fact we don't save enough to equal our investment and worse, our saving is absorbed by government deficit."

What about health care?

"It's a myth that because the US spends more on health care per capita or as a percentage of gross domestic product relative to other countries, this makes us less competitive," Stuckey said. "In the US, employers share or incur the cost of health care where other countries broadly do it through the tax structure. Total compensation per employee is what has to be compared internationally and not just what's in the wage."

With increased use of managed health-care programs and larger copayments, the higher costs are being paid by employees or their employers. In either ease, the actual paycheck may be smaller. "So lower income people have a net lower standard of living, except for health care, because more of their money is being siphoned off by their employers or their insurance companies to pay for their health care.

"A major underlying problem with our health-care system is we demand too much, and the system is beautifully set up to deliver it. Another problem is the defensive testing done for fear of litigation. Related problems include pre-existing conditions, our aging population and technological improvement. Pre-existing conditions mean you many lose your insurance and not be able to get it again. If you change jobs and you have an existing medical situation - the so-called job-lock issue - you may have a problem unless your new employer provides insurance.

"This all rests on the bedrock of an aging population and the most technologically sound and improving medical system in the world," Stuckey said. "It costs a lot more to innovate than it does to emulate. So the single-pay system, as they call it in Canada and the UK or Germany, can copy what we have a lot cheaper than they can create it.

"So what's the answer? Well, you can't sensibly do away with the aging population. After all, I'm part of it! And, I don't think we want bureaucratic control of technological improvement as has been suggested under the Clinton program. I don't think we want to begin to tell people where they can go to school and what they may study.

"So how do we deal with this? I happen to believe there are relatively simple ways to do it. One is to wean us away from third-party pay," Stuckey said.

He explained how one company reached that goal. "They found they were spending an average of $4,700 per year per employee for health care. They then determined what it would cost to insure employees against catastrophic illness. I think they found it cost something like $2,000 per year. So they bought that insurance and the rest they gave to their employees in a medical savings account of $2,700. If you were young, healthy or lucky, you could have $2,700 to roll over in an IRA. In the event of serious illness, yon can draw from that medical bank account and if the illness becomes catastrophic, the insurance covers it.

"So if you eliminate job lock, permit medical-savings plans and roll overs into IRAs and other forms of savings and do something about the litigation process, you needn't go to a massively run system where we increasingly lose personal control."

In recent years, Americans learned a new word, downsizing.

Stuckey said the term has come to mean "the taking of a given entity and shrinking it in some respect. It has also taken on the meaning of shrinking the labor force, substituting technology and higher productive machines for labor."

Announced layoffs are going to become less frequent, but in 1994, more people were downsized than were in 1993 and 1992. "I think the wave is cresting but its never going to disappear," Stuckey said. "And it doesn't impact only on manufacturing. It hits services as well, information services, computer services, legal services, all of that."

As he thought about retirement and his career, Stuckey looked back to 1960 and drew some comparisons.

"In 1960, gross domestic product was $500 million," he said. "It is 6.8 trillion now, a 14-fold increase. Employment in 1960 was 66 million. It's now 124 million. Who says we don't create jobs? They say machines displace workers but it's the old lump of labor fallacy that says there's a finite amount of work available and the way you deal with it is to control the number of bricks you lay a day or how many hours you featherbed relative to your time on the railroad. But the truth is, as you produce more and more, at less and less cost, and, therefore, at a lower price, you broaden the market and create jobs."

Consumer spending has increased 14-fold since 1960 while employment has only doubled in that time, according to Stuckey. "That tells you something about the standard of living across that period of time," he said.

"In 1960, the federal government spent $90 billion. Now they spend one and a half trillion," Stuckey said. "That $90 billion was equal to 18.5% of our gross domestic product. Now the $1.5 trillion is equal to 22% of our gross domestic product. Also in 1960, revenues were 90 billion so we had a balanced budget. We also had a balanced budget in 1969. We've had none in the last 25 years. As a consequence, the federal debt has gone up from $290 billion in 1960 to $4.6 trillion currently.

"Total government spending, federal, state and local, was $135 billion, equivalent to 26% of gross domestic product in 1960," he said. "Its now $2.2 trillion, equivalent to 35% of gross domestic product and consists mostly of transfer payments, Social Security, grants-in-aid, and other entitlements. The smaller part of it is spent for teachers' salaries, road building, defense, etc.

"Spending at all levels of government, federal, state and local, divides into a ratio of 60% federal and 40% local and state. But the figures for procurement alone are reversed. That is, of total procurement dollars, the federal government spends 40% of the money while state/local governments spend 60%."

And what about the recent election?

"The voters finally said enough is enough. They voted against bigger government, against higher taxes, against overregulation, and against the increasing intrusion by all levels of government into our personal lives," he said. "And then, the attempt to federalize our health care frightened everybody. And the government is promising more. The crime bill was acknowledged to add more bureaucrats than it would policemen."

According to Stuckey, "Within the Washington Beltway, politicians, not unique to any party, define cut in a different way. To you and me, it means a program of five is cut to four. The politician takes a program of five, budgets it to increase to seven, cuts it back to six and says he's made a cut. Meanwhile, the actual expense is six and not five. And, then to make it even more interesting the politician calls it an entitlement and says it can't be discussed."

"(Newt) Gingrich and company are going to tell them and show them how you can cut. You eliminate two-thirds of the staffs down there, you eliminate committees, you eliminate programs, that's the way you cut.

"It's going to be an interesting two years," Stuckey said.

Mid-Sized Producers

Most mid-sized manufacturers expect product orders and payrolls to grow this year even though half still have doubts about the future direction of the US economy and many believe inflation will increase.

Those sentiments are among the findings in a national survey conducted in December by Chicago-based Grant Thornton, an accounting and management consulting firm. In telephone interviews with a random sample of 350 top executives representing US manufacturing companies with annual sales between $10 million and $500 million, Grant Thornton found:

* More than two-thirds (70%) of all manufacturers believe that orders for their companies' products will increase in 1995. Another 24% expect the level or orders to remain about the same.

* To keep pace with rising demand for their products, 72% of all manufacturers said they will add to staff next year. Only 42% said they will resort to overtime or extra shifts in 1995, compared with 74% that used these methods to increase manufacturing capacity in 1994. Only four manufacturers in 10 intend to use temporary production workers next year, down from 51% in 1994.

* Manufacturing executives are divided in their opinions of the US economy. A total of 49% believe the nation is recovering from recession while 48% describe the economy as in an uncertain state that could either revert into a recession or remain in recovery. Uncertainty is highest among smaller companies and manufacturers of consumer products while optimism is strongest among businesses in the Midwest.

* Moreover, 65% fear a rise in inflation in the next 12 months. This is the highest percentage expressing this view in the five years that Grant Thornton has been surveying manufacturers.

"The fact that so many manufacturers are uncertain about the direction of the nation's economic health represents just how fragile this recovery has been," Michael N. Cantwell, national director for manufacturing and partner in charge of this study, said. "The nation's economy continues to face serious long-term challenges, and manufacturers recognize that they're going to require long-term solutions."

Cantwell believes fears of inflation are rising because many mid-sized companies are unable to pass along higher costs to customers. "Suppliers are getting squeezed on both ends," Cantwell said. "Large customers are holding the line on price increases, yet their own suppliers - many larger than themselves - are demanding higher prices for raw materials and component parts.

Despite the cost pressures manufacturers are facing, many have reached the point where surging orders require staff additions.

"Manufacturers are biting the bullet and hiring full- or part-time workers because they're afraid product quality could suffer if they continue to rely heavily on overtime and extra shifts to meet the growing demand for their products," he said. "Surprisingly, fewer plan to rely on temporary workers, which could alleviate capacity pressures in the short run. This would suggest that manufacturers are confident their sales will remain strong for the foreseeable future."

Paper

Manufacturing capacity for most grades of paper, paperboard and wood pulp will continue to expand at rates below historic norms during the period from 1994 through 1997, according to the American Forest & Paper Association (AF&PA), Washington, DC.

The group's annual Capacity Survey, released in December, projected the four-year growth rate for all grades of paper and paperboard at an annual average of 2% compared with an annual rate of 2.4% in the period 1983 through 1993.

Despite only moderate capacity gains overall, the industry will continue to substantially increase consumption of recovered paper as a furnish for tile manufacture of paper and paperboard from 28.3-million tons in 1993 to 35.6-million tons in 1997. This 5.8% annual rate of increase is more than twice the 2.7% growth rate planned by the paper industry for total-fiber consumption.

"The strong growth in use of recovered paper reflects our industry's goal to recover - for domestic use and export - half of all paper used in the year 2000," Richard Storat, AF&PA vice president for economics and materials. "This commitment, with it broad environmental benefits, is evident in our heavy capital investment in paper recycling and deinking facilities."

The survey said growth in tonnage capacity for all paper and paperboard will increase 7.6 million, from 90.6 million in 1993 to 98.2 million in 1997. Total capacity for all paper grades will increase from 45.1-million tons in 1993 to 47.3-million tons in 1997, an average of 1.2% annually. Only three new machines are scheduled for startup after 1994 - one uncoated, free-sheet machine and two tissue machines.

Production capacity for packaging and industrial converting grades will remain essentially unchanged, increasing from 5.3-million tons in 1993 to 5.4-million tons in 1997.

Tissue-paper production capacity will grow from 6.4-million tons in 1993 to 6.9-million tons in 1997. One new machine is expected to begin production in 1995, followed by a second in 1997. Output from these additions will be partially offset by a number of shutdowns and idled machines.

The total paperboard capacity is projected to increase 2.9% annually over the four-year period, from 45.5-million tons in 1993 to 50.9-million tons in 1997, slightly exceeding the 2.5% annual growth rate of the 1983-1993 period. This consistent pattern of growth masks significant variations among individual grades, according to the survey.

Containerboard capacity growth will be fueled by a number of new mills and machines. A total of 14 new machines are scheduled to come onstream between 1993 and 1997, eight of which will be in new minimills. Overall capacity for containerboard grades will grow at a 3.2% rate from 1993-1997 with total linerboard capacity growing at a 3.8% annual rate.

While US containerboard capacity is slated to grow at faster than historic rates, the rest of the world's capacity is estimated to increase at a slower 2.3% annual rate from 1993 to 1997. Total medium capacity is projected to increase at a rate of 1.6% annually. Two-thirds of growth in containerboard capacity will be in recycled grades.

Solid bleached paperboard, a category that includes liner, folding, milk carton and food service, and other grades, is projected to grow at an annual average-capacity rate of 3.1%, reaching 5.6-million tons in 1997. Manufacturers of unbleached kraft folding paperboard are planning capacity expansions that will increase production at a 7.1% annual rate, from 1.5-million tons in 1993 to just under 2-million tons in 1997.

Other recycled boxboard grades are expected to grow .7%, from 7.8-million tons in 1993 to 8-million tons in 1997.

Metallized Packaging

After a decade and a half of impressive double-digit growth, metallized packaging materials have reached the mature stage and while growth is expected to continue through 1998, it won't be nearly as spectacular, according to a recently published study.

Metallized Paper and Film in Packaging, a study produced by Omega Research Associates, Pittsburgh, PA, forecasts that growth during the remainder of the decade will be less than 5% in most years. Overcapacity is affecting the industry and, in combination with rapid technological improvements and the increased cost of acquiring up-to-date equipment, will result in a shakeout of less efficient suppliers during the next five years.

On the positive side, the report said steady but modest growth will continue because metallized substrates offer good, albeit imperfect, barriers to light, oxygen and moisture, and the visual impact of metallized packages on the retail shelf is striking. Strong growth in some end-use markets, such as snack foods, is another factor working in favor of metallized packaging.

The Omega report concludes that despite the diminished growth rate, metallized packaging materials are well-positioned for the remainder of the decade. Total demand for metallized film and paper in the US is forecast to be 198-million lb. in 1998.

Packaging end uses, including labels, will represent nearly 60% of the total demand. Oriented polypropylene film and polyethylene terephthalate film will account for almost 60% of the metallized packaging while paper and paperboard will represent an additional 30%.

Despite the anticipated growth, Omega is forecasting that most film suppliers and converters will stay with their core business and not acquire in-house, or captive, metallizing capabilities. Instead, a relatively small number of technology suppliers, merchant metallizers and film producers will dominate the industry as it expands worldwide during the next five to 10 years. Globalization of the metallizing industry, which is already occurring, is a trend expected to accelerate in the future, according to the report.

Resin

A strong US economy together with plastic's innate versatility spurred continued robust growth in resin production, sales and captive use in 1994, according to year-end estimates released by the Society of the Plastic Industry Inc. (SPI), Washington, DC.

SPI estimates indicate production increased by 8.1% in 1994 while sales and captive (internal) use rose by 9.6% as compared with 1993 levels. US resin production will total 74.5-billion lb. for 1994 while sales and captive use are expected to reach 77.9-billion lb. Sales volume exceeds production due to inclusion of sales from imports for certain resin categories.

Kevin Boyle, chairman of the SPI Committee on Resin Statistics, said the "healthy and growing" US economy contributed to the banner year for plastics resins. "Employment, income and a bright outlook on the economy stimulate the nondurable-goods segments of plastics like packaging and consumer goods, which represent 41% of plastics sales," Boyle said.

Resin sales and captive use increased steadily at a 10-year average annual growth of 5.6% between 1984 and 1994. Resin production has grown at an average annual rate of 4.9% since 1984 - about one and one-half times that of the US gross domestic product.

With domestic sales and use of nearly 10.5-billion lb., high-density polyethylene is projected to be the volume leader in 1994, taking the top spot from polyvinyl chloride.

Radiation Curing

Radiation processing - using high-energy radiation from ultraviolet lamps and electron-beam accelerators - has developed into a large industry, and the technically demanding radiation-cured coatings, inks and adhesives sector has grown into a profitable specialty business for suppliers of formulated products, according to Skeist Inc., Whippany, NJ.

The research firm has been following the radiation-curing business for 25 years and is expected to issue Radiation Curing IV, a multiclient study on March 1.

Skeist estimates the combined US market for radiation-cured formulations tops $350 million, and the recent growth rate - about 9% per year in volume - exceeds, by far, growth rates of adhesives, coatings and inks as a whole.

Material Substitution

The use of plastics in applications where paper was the traditional material of choice is expected to rapidly accelerate, according to a recently released study from Business Communications Co. Inc., Norwalk, CT.

Plastics vs. Paper & Paperboard predicts paper usage across the spectrum of application categories will post gains of 780,000 tons against losses of 1.1-million tons between 1993 and 1999. The vast majority of the losses will occur as a result of plastics being substituted for paper in a variety of applications. The losses will be concentrated in traditionally vulnerable areas, including shipping sacks, grocery bags, corrugated boxes, folding cartons and bleached-milk cartons.

Between 1999 and 2004, paper will post consumption gains of 14,000 tons versus losses of 1.02-million tons. Plastic substitution will account for 83% of paper losses.

Paper used for covers, labels and wrapping will suffer as a result of the increasing [TABULAR DATA OMITTED] preference for plastics in these applications. Of the 68,000 tons of consumption, paper is expected to lose in this product segment from 1993 to 1999, about 46,000 tons will be a direct result of plastics substitution. From 1999 to 2004, consumption will decline 49,000 tons, of which 38,000 will be due to plastics substitution.

Shipping sacks, grocery bags, shopping bags and merchant bags will see a great deal of plastic substitution. From 1993 to 2004, approximately 950,000 tons of paper consumption will be lost in this sector, of which 781,000 tons can be directly attributed to plastics substitution. About 38% of the losses will occur within the grocery-bag business. Paper bags will account for only 32.5% of all grocery bags by 1999, according to the study.

Plastic Containers

US demand for plastic containers will increase 2.8% annually to reach 7.3-billion lb. in 1998, according to a report from Freedonia Group Inc., Cleveland, OH.

Plastic Containers, Freedonia study No. 623, suggests advances in barrier properties plus cost and performance advantage over other materials will be the growth drivers for plastic containers in the US.

William Weizer, the report's author, said further gains will be threatened by slowing end uses and source-reduction efforts. Further advances are unlikely.

Polystyrene food-stock trays will expand marginally over the next five years due to environmental concerns and saturated applications. Dual-ovenable trays will benefit from trends favoring the consumption of upscale frozen foods as entrees. Thermoformed polypropylene trays will enjoy increased based on the resin's versatility, low cost and advantages in multilayer technology for microwave-only applications.

After 41 years of service with the company, Richard A. Stuckey, chief economist of the Du Pont Co., Wilmington, DE, has elected to retire.

He began his career in Du Pont's finance department in 1956, became assistant chief economist in 1975 and was named chief economist in 1986.

A new home is under construction in Stuart, FL, where Stuckey and his wife, Liz, will reside during the winter months. Summers will be spent in Ocean City, NJ. His interests include boating and ice dancing, a skill he has recently broadended with the purchase of in-line roller-blade skates.

Following his graduation from Pennsylvania State University in 1956, he served as a lieutenant with the US Navy from 1953 to 1956. He earned his MBA at the University of Delaware in 1961 and was the 1988 winner of the Silbert Economic Forecasting Award for the nation's most-accurate economic forecasts for a three-year period.

Although retired, he will not leave economics totally. He will retain his role as a member of the board of directors of Coltec Industries Inc. and will continue membership in various associations.