Worst cardboard-box recession since 2008 could be a sign of broader economic weakness

• Cardboard-box sales have seen the biggest contraction since the Great Recession of 2008-2009.
• Packaging Corp. of America just reported an almost 10% year-on-year slump in second-quarter shipments.

For many months now, a debate has been raging among experts whether the US economy is facing a recession, following the Federal Reserve's steepest interest-rate increases in four decades.

And they have used all kinds of gauges – from job-market numbers to the shape of the bond-yield curve – to argue in support of and against predictions for a potential downturn.

But a rather offbeat indicator has been signaling a level of economic weakness not seen since the global financial crisis of 2008-2009 – and that's the shipments of cardboard boxes.

Packaging Corp. of America, the No. 3 containerboard company in the US, reported this week that sales of cardboard boxes fell 9.8% last quarter from a year earlier in one of the biggest slumps on record. That added to a 12.7% plunge during the first quarter. The combined six-month decline is the biggest since early 2009, according to a report by FreightWaves Research.

The thinking goes that cardboard boxes can act as a barometer for the health of the economy, since they play such a crucial role in transporting goods — not just to consumers who buy things online, but to stores and warehouses that receive those goods in bulk. That means that if demand for cardboard is slowing, consumers are buying less stuff.

The Fed's aggressive interest-rate increases have curbed demand for cardboard boxes over the past year and demand may enter a prolonged slump, according to FreightWaves, a supply-chain intelligence firm. The Fed has raised benchmark rates by 500 basis points since early 2022 to tame historically high inflation.

The outlook for cardboard box shipments continues to be cloudy, according to FreightWaves.

"With regional banks cutting back on lending out of necessity, the emergency government food stamp (SNAP) benefits a thing of the past, federal student loan payments set to resume in October and the Federal Reserve continuing to tighten monetary policy to combat inflation, we're unsure what would lead to improved box demand," the firm said.

Some experts see the slide in cardboard box shipments as a sign of broader economic trouble. Danielle DiMartino Booth, CEO of QI research, tweeted ironically in response to the Packaging Corp. results, saying, "What recession?"

Packaging Corp. sales have now seen year-on-year declines for the fourth consecutive quarter, which could also be a sign of demand returning to pre-pandemic levels after an exceptional two-year spike. But for those who see cardboard as a crucial barometer of health for the US economy, this spells only bad news.