{"id":168642,"date":"2024-02-28T13:15:40","date_gmt":"2024-02-28T20:15:40","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=168642"},"modified":"2024-04-04T06:07:42","modified_gmt":"2024-04-04T12:07:42","slug":"what-the-cardboard-box-indicator-means-for-the-economy","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/what-the-cardboard-box-indicator-means-for-the-economy","title":{"rendered":"What Is the \u2018\u2019Cardboard-Box Indicator\u2019\u2019\u2014Should Investors Pay Attention to It?"},"content":{"rendered":"\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm\/?e=BIGPOC5691834753\" width=\"100%\"><\/iframe>\r\n  \n\n\n\n\n<p><span data-preserver-spaces=\"true\">2024 will be a crucial year for the U.S. economy, particularly around what the Fed will do with&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/investors-stop-worrying-about-rates-in-2024\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">interest rates<\/span><\/a><span data-preserver-spaces=\"true\">. But for the Fed to lower rates, they have to see signs of slowing growth.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">What reliable signs are there that the economy is moving in either the recessionary or the growth direction? There has to be a better way to tell than using the&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/investorplace.com\/2024\/02\/the-super-bowl-indicator-can-the-game-winner-predict-how-stocks-will-do-this-year\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Super Bowl Indicator<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;(it doesn\u2019t work, folks).&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">According to some seasoned investors, you may want to ditch the many tools for predicting economic outcomes in favor of just one: the so-called cardboard-box indicator, also known as the cardboard-box index. What is it, and is it really the most reliable way to tell which way the economy is headed?<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">What Is the Cardboard-Box Indicator?&nbsp;<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Investors have used the cardboard-box indicator for years. The logic behind this metric is that the total number of corrugated fiber boxes ordered by manufacturers, the greater their planned output. Because up to 80% of perishable goods are still shipped in cardboard boxes, for many economic experts, it\u2019s still a dependable way to predict where consumer spending\u2014and, therefore, the economy as a whole\u2014is headed.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Lately, the cardboard-box index has been making the headlines because Jeffrey Kleintop, managing director and chief global investment strategist at Charles Schwab, uses it to issue his predictions about the economy.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">&#8220;Things that we make or ship tend to go in cardboard boxes,&#8221; Kleintop&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.marketwatch.com\/story\/the-cardboard-box-recession-is-over-an-out-of-the-box-economic-recovery-is-coming-0fc01cf5\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">told MarketWatch<\/span><\/a><span data-preserver-spaces=\"true\">. &#8220;I look at demand for corrugated fiberboard, which is what most cardboard boxes are made of. During the last three or four recessions over the last 30 years, demand for cardboard boxes fell by 10% to 15%.&#8221;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">There\u2019s definitely something to it because the last time cardboard-box revenues and shipments plummeted drastically, by 50%, we were in the throes of the 2008 recession. Last year, cardboard-box manufacturing declined by 10%, which, according to Kleintop, was a significant number that signaled that the U.S. economy was, in fact, in a recession despite nonmanufacturing stocks doing well.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">This year, demand for corrugated fiber has already bounced back. Don\u2019t be surprised if you notice nonmanufacturing stocks declining this year while manufacturing stocks increase. This is actually a sign of a healthy economy, according to Kleintop.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">How Reliable Is the Cardboard-Box Index?&nbsp;<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">On its face, the cardboard-box index is not a bad way to gauge which way the economy is headed, especially given that respected finance experts endorse it. In fact, it is widely believed that the cardboard-box index was first endorsed by former Federal Reserve chair Alan Greenspan. It would seem that it doesn\u2019t get any more reliable with a backing at that level.&nbsp;&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">And yet, there is one potential issue with the cardboard-box index, and it\u2019s actually a pretty big one: The indicator doesn\u2019t necessarily reflect the wider context of the U.S. economy. True Tamplin, a certified educator in personal finance and founder of Finance Strategists, told BiggerPockets that it\u2019s important to consider one crucial fact of today\u2019s economy: the \u2018\u2019shift in consumer spending from goods to services, which reflects 70% of GDP.\u2019\u2019<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">While the decline in cardboard box manufacturing at the end of 2022 \u2018\u2019was interpreted as a signal of eroding consumer demand following the pandemic, influenced by factors like dwindling savings, inflation, and fears of a recession??,\u2019\u2019 Tamplin says, he urges caution before aligning with these interpretations. He thinks that while the sale of cardboard boxes definitely tells us something about the economy, the decline in cardboard sales \u2018\u2018doesn&#8217;t necessarily indicate an overall economic decline, but rather a shift in the nature of&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/what-the-consumer-is-telling-us-about-the-economy\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">consumer spending??<\/span><\/a><span data-preserver-spaces=\"true\">.\u2019\u2019<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Back in 2018,&nbsp;<\/span><em><span data-preserver-spaces=\"true\">The Atlantic<\/span><\/em><span data-preserver-spaces=\"true\">&nbsp;called this a \u2018\u2018<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.theatlantic.com\/sponsored\/citi-2018\/the-american-economy-is-experiencing-a-paradigm-shift\/2008\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">paradigm shift<\/span><\/a><span data-preserver-spaces=\"true\">\u2019\u2019 in the U.S. economy, no less. The argument was persuasive: A huge number of consumer goods now come with at least one functionality aspect that is service-based and typically digital.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Think of a smart TV, for example. Part of your consumer relationship with this product is using all the streaming services that come with it. These are provided and managed by digital service companies and staff. And these aren\u2019t really optional add-ons anymore, either. These features are \u2018\u2018critical to functionality,\u2019\u2019 as&nbsp;<\/span><em><span data-preserver-spaces=\"true\">The Atlantic<\/span><\/em><span data-preserver-spaces=\"true\">&nbsp;explains.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">A Service Economy Indicator?<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Maybe in a few years\u2019 time, we\u2019ll have a Netflix indicator based on how many people are canceling\/renewing their subscriptions or a banking app indicator. Digital services are integral to today\u2019s consumer spending. So, it may be well worth paying attention to how the service economy is doing as much as to trends in manufacturing.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">The problem is that the service economy is difficult to track reliably. It\u2019s just that much easier to track the number of cardboard boxes produced and shipped. A&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.commerce.gov\/sites\/default\/files\/migrated\/reports\/serviceindustries_0.pdf\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">U.S. Department of Commerce Report<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;admits that currently, \u2018\u2018BLS productivity data are available only for a limited set of U.S. service industries, accounting for about 40% of all service sector employment.\u2019\u2019<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">This means we don\u2019t really know how a huge chunk of the U.S. economic output is performing, hammering home the realization that tracking the economy on the basis of consumer behavior is currently a bit of a fool\u2019s errand\u2014or at least it won\u2019t get you very far on its own.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">This doesn\u2019t mean that the cardboard-box index has no value. But if you\u2019re basing your&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/real-estate-900\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">real estate investment<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;decisions on it, you may need to do a bit more homework.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">BiggerPockets spoke to Adam Koprucki, founder and CEO of&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/realworldinvestor.com\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Real World Investor<\/span><\/a><span data-preserver-spaces=\"true\">. As a bare minimum, he recommends using the cardboard-box index \u2018\u2018in conjunction with other leading indicators, like new&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/what-are-housing-starts\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">housing starts<\/span><\/a><span data-preserver-spaces=\"true\">, money supply, and the shape of the yield curve.\u2019\u2019&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">We\u2019d add the&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/apps.bea.gov\/scb\/issues\/2023\/12-december\/1223-digital-economy.htm\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">BEA Digital Economy Tracker<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;to that. It doesn\u2019t encompass all of the service economy, but it\u2019s a pretty interesting tool for measuring what is, by now, an integral part of the country\u2019s economic output.&nbsp;<\/span><\/p>\n\n\n\n<p><strong><span data-preserver-spaces=\"true\">Spoiler alert:<\/span><\/strong><span data-preserver-spaces=\"true\">&nbsp;The numbers are looking pretty good. In the 2018-2022 period, the growth of the digital economy outpaced the real GDP growth of the overall U.S. economy, 6.3% versus 1.9%. Now, that is impressive\u2014and the data may well hold some key insights into why the U.S. never entered a post-pandemic recession.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Cardboard-box production can be tracked at the&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.fibrebox.org\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Fibre Box Association<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;website.<\/span><\/p>\n\n\n\n    \n  <div id=\"visibility-group-block_fe6b49dd1ff96319bab023fc9adf6b4f\" class=\"visibility-group  hidden\">\n        \n\n<div id=\"hero-block_446dd2190377eed06e9edaeff0e4b628\" class=\"first:mt-0 hero-block py-4  alignwide   has-background has-theme-gold-light-background-color has-text-color has-theme-gold-color\">\n    <div\n        class=\" flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 w-full \">\n            <main class=\"py-4\">\n                \n\n<p class=\"has-theme-gold-color has-text-color has-large-font-size\" style=\"font-style:normal;font-weight:800\">Get the Best Loan Today<\/p>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-slate-900-color has-text-color\" style=\"font-size:16px\">Find trusted, <em><strong>investor-friendly<\/strong><\/em> lenders who specialize in your strategy. <\/p>\n\n\n\n<p><\/p>\n\n\n\n<div id=button-custom-event-block_a40e0e4ae6d6bc96afb7bd1aa49363f3 class='button-custom-event'>\n      <a href=\"https:\/\/www.biggerpockets.com\/business\/finder\/lenders\" x-on:click=\"window.analytics.track(&#039;Blog Block | B2C Marketplace Lender Finder&#039;, {\n      referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/what-the-cardboard-box-indicator-means-for-the-economy&#039;,\n    });\" class=\" btn-shape inline-block no-underline has-background has-theme-gold-background-color has-text-color has-white-color\" target=\"_blank\">Find a Lender<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n                <div class=\" first:mt-0 relative h-full lg:flex lg:items-center\">\n            <img decoding=\"async\" class=\"object-cover w-full relative z-20 my-0  rounded-md hidden lg:block\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/08\/Marketplace-Blog-Blocks-Lender-v3.png\" alt=\"investor friendly lender, investor friendly real estate loans\" title=\"\">\n        <\/div>\n            <\/div>\n<\/div>\n\n  <\/div>\n  \n\n\n<div class=\"wp-block-group\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n    \n  <div id=\"visibility-group-block_64dd31c79f00f\" class=\"visibility-group  \">\n        \n\n<div style=\"height:10px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div id=\"hero-block_64dd2875dba9d\" class=\"first:mt-0 hero-block py-4    has-background has-slate-100-background-color has-text-color has-theme-slate-color\">\n    <div\n        class=\" flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 w-full \">\n            <main class=\"py-4\">\n                \n\n<h3 class=\"wp-block-heading my-0 tracking-tight font-extrabold has-theme-slate-dark-color has-text-color has-large-font-size\">Join the community<\/h3>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-theme-slate-color has-text-color\" style=\"font-size:16px;font-style:normal;font-weight:400\">Ready to succeed in real estate investing? 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Is he right?<\/p>\n","protected":false},"author":613618,"featured_media":168645,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7383,7119],"tags":[],"class_list":["post-168642","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economics","category-biggerpockets-daily"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/168642","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/613618"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=168642"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/168642\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/168645"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=168642"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=168642"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=168642"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}