“Carton decline” sounded the alarm! Q2 shipments hit a 10-year low, US consumer resilience was sniped by Trump's tariffs

The Zhitong Finance App notes that analysts and investors will look for clues about the economic feelings of American households in Friday's retail sales report. And those watching the carton industry say they have already caught a glimpse. As an unconventional economic indicator, sales of corrugated board used to transport everything from donuts to dishwashers are declining, indicating that retail demand in various industries may be adjusted in the near future.

According to data from the trade association Fiber Carton Association, US carton shipments (that is, the volume of empty packaging material sold to retailers) have fallen to the lowest level in the second quarter since 2015. (Corrugated board is also used for other products such as 3D advertising displays, but since most of it is used for packaging, the industry usually mixes “carton shipments” with “corrugated board shipments”.)

Memphis-based International Paper, one of the world's largest pulp and paper companies, reported a 5% year-on-year decline in daily US carton shipments during the quarter. Dublin packaging giant Smolph Capa Group recorded a 4.5% drop in corrugated board sales in North America, the biggest drop in all of its operating regions.

CEO Anthony Smurphy said in a recent earnings call, “If US sales pick up, it will boost our confidence, but we haven't seen any signs yet.”

In a country where consumer spending accounts for nearly 70% of the economy, any retail contraction would alert economic observers and government officials.

Retail sales in the US rebounded in June after two consecutive months of decline, temporarily easing concerns about consumers' health. Retail sales data for July will be released on August 15. The current forecast shows a month-on-month increase, partly due to online promotions such as Prime Day.

Brett House, an economics professor at Columbia Business School, pointed out that although the highly seasonal carton industry is not a direct indicator of retail spending, like beauty spending or consumer confidence, it can issue an early warning when the problem first appears. Since cartons aren't usually ordered too early, they reflect purchasing and manufacturing activity in near real time.” It evolves in sync with the needs of consumer goods and their manufacturers,” House said.

The decline in packaging demand in 2025 is mainly related to President Trump's chaotic signals over tariffs. Companies are unwilling to hoard large packaging materials until the impact of tariffs on costs and long-term demand for terminal products is clear.

Courier companies such as FedEx Express and UPS have yet to update their annual guidelines as usual due to unclear circumstances, but UPS CEO Carol Tome told analysts that the small package market “was adversely affected by American consumer confidence, which was close to a historic low point” in the last quarter.

At the earnings conference in late July, Smirphy said he hoped demand would pick up in August and September — “only if the dust settles on the tariff issue.”

Bloomberg think tank analyst Ryan Fox pointed out that organic growth in consumer goods “doesn't exist at all”, and supermarkets are even showing “buy two get three free” promotions. This has never been a sign of good demand. Former seller analyst Adam Josephson added that low home transactions mean consumers are no longer buying large items such as refrigerators (which need to be packed in cartons) and double couches.

This is in stark contrast to the early days of the COVID-19 pandemic — when demand for packaging surged, and some pulp mills in North America switched to cardboard, causing a brief shortage of cultural paper. (About 100 million copies of the product catalog in the fall of 2021 were not delivered to US consumer mailboxes because printers were unable to obtain paper.) However, the popularity of cardboard brought about by the pandemic is only a brief resuscitation for an industry that has long been plagued by high costs and old facilities.

The Smolfy Cappa Group just announced the closure of an old factory in Iowa. Earlier this year, International Paper also said it would shut down four factories, including a factory in Louisiana that produces box board paper (brown paper used to make boxes).

The factory was once the seventh-largest employer in the Diocese of Natchitoches, and its closure caused the local school board to shut down two schools due to tax cuts.

Ronnie Williams Jr., the mayor of nearby Natchitoches, said, “This is due to economic laws, and the international paper industry must review its business model.” His parents and grandparents all worked in this factory that has been in operation for 50 years.

Ron Sahin, founder of retail packaging consulting firm Hudson Windsor, believes that if Trump can revive the US manufacturing industry and drive more local products that need to be transported, it may become the industry's salvation. But this needs to offset the impact of reduced imports — imported goods usually need to be unpacked and repacked, which is a carton-intensive process. He also pointed out that the decline in US food exports to trading partners may also impact packaging demand.

“Carton makers are eagerly awaiting a recovery in demand, but the situation has not improved and is beyond their control,” Josephson said. “All the metrics I'm tracking point in a less optimistic direction.”