Paper demand trending down relative to GDPUntil the turn of the millennium, printing and writing paper demand tended to grow roughly in line with real GDP. The proliferation of electronic media has dealt a substantial blow to this relationship. Over the course of the 1990s, global real GDP expanded at an average annual rate of 3.2% while global P&W paper production expanded by 3.5%. By contrast, over the decade ending in 2010, global real GDP expanded by 3.7% per year (thanks to rapid growth in the emerging economies) while global paper production increased at only a 1.3% average annual rate.
The weakening link between P&W paper demand and real GDP is depicted for several key countries in the graph below. The black line shows the ratio of apparent consumption of P&W paper to real GDP on a global basis. The United States has been a key bellwether when it comes to the relative decline of the P&W paper sector. The relationship weakened a bit later in other advanced economies such as Japan and France. Most worryingly for stakeholders in the global pulp and paper industry, the downward trend in this key ratio appears to be gaining traction in the emerging economies as evidenced by China and Brazil in the graph.
Bottom Line: Even though the GDP of emerging economies will continue to grow over the next decade, we should not expect those economies to make up for decreases in P&W paper consumption of the advanced economies. In fact, at similar stages of development, the P&W consumption in emerging economies will plateau well below levels reached by advanced economies at similar stages of economic development.
The Link Between Printing and Writing Paper Demand and Real GDP Has Weakened
By Brendan Lowney, Forest Economic Advisors, Source: FPInnovations
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