International Paper CEO: 'Box Demand Isn't A Direct Co-Relation To GDP Anymore In The U.S.'


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The cardboard box indicator has been one of the best metrics in the past to evaluate the health of the U.S. economy. However, according to International Paper Co (NYSE: IP) CEO Mark Sutton, the demand for cardboard boxes is no more a direct co-relation to the GDP. Sutton was on CNBC recently to discuss the outlook for box demand and the demand for boxes from online retailers.


Stronger Second Half

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“We started off stronger than we thought we would for the first-quarter of the year,” Sutton said. “We posted pretty good results. Box demand was up a couple of percent year-over-year and we were thinking it would probably be 1 percent, so, and that was across a lot of segments. So, we feel pretty good about that. And I think our indicator is forward looking would say that that the second-half should probably be stronger than the first-half.”


No Direct Co-Relation To GDP


Sutton was asked why even though the box demand was better than expected for the first-quarter, the GDP and other metrics came below expectations. He replied, “Box demand isn’t a direct co-relation to GDP anymore in the U.S., it’s more about non-durable production and we think about the American consumer, it could be gas prices, it could be pent up demand.”


“But going out to eat, other non-durable segments really showed some strong point across food, online distribution, the restaurant industry. So, it’s sometimes quarter-to-quarter disconnected. But we saw some pretty good demand.”


Demand From Online Retailers


On the demand for boxes from online retailers, Sutton said, “What’s interesting about that segment is, it’s about 5 percent of the box market, but it’s growing 20 percent a year […] It used to be seasonal and now we see a strong result even away from the holiday season.”


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