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The initial estimate of 4.3% annualized US gross domestic product (GDP) growth in the third quarter of 2025 sharply contrasted with the 1.4% year-over-year slide in corrugated box shipments, with the latter figure likely overstating the market’s health given that shipments per day sank by 2.9%. Although corrugated box shipments will almost inevitably lag headline GDP growth in the services-dominant US economy, the degree of decoupling in recent years has been concerning for many market participants. If the 2.7% real GDP growth of 2024 and the 2.1% growth in the first three quarters of 2025 was not enough to support box shipments growth, what is?
A complete answer to this question provides some reassurance on the extent to which economic activity is still linked with corrugated demand, but it may also present new causes for concern, especially regarding the near-term outlook.
Despite the reasonably healthy headline numbers, the performance of the US economy in 2025 was tumultuous. Tariffs caused heavy volatility in imports, exports and inventories, which in turn caused headline annualized GDP growth figures to swing a great deal, with real GDP growth briefly turning negative in the first quarter before rebounding to a 4% rate in the second and third quarters. In this environment, our preference has been to focus on an alternative measure of US economic activity: real final sales to private domestic purchasers, which exclude fluctuations driven by trade, inventories and government spending. Focusing on year-over-year changes, as in Figure 1, smooths out even more of the volatility.
A major factor in the healthy performance of the US domestic economy in recent quarters has been the massive wave of investment in artificial intelligence (AI). Real final sales to private domestic purchasers have done slightly better than headline GDP in 2025, rising by 2.7% through the third quarter. However, an increasing share of this growth has been driven by investment in information processing equipment & software. This sector accounted for less than 10% of the growth in real final sales to private domestic purchasers in 2023-24 and a whopping 33% in the first three quarters of 2025. Data center investment has accelerated to a record rate since the explosion of interest in AI and its ascendance has disguised the slowdown in year-over-year growth rates for the rest of the US economy, depicted by the purple bars in Figure 1.
In the first quarter of 2025, prior to Liberation Day, year-over-year growth was still reasonably healthy, but it fell below 2% in the second and third quarters. This was the worst performance since 2022, when the economy was still cooling back to trend after the 2021 rebound. Besides 2022 and 2025, the only other quarters since 2007 with growth below 2% were the Great Financial Crisis, late 2018 and early 2019 (when US manufacturing and corrugated box demand were in recession) and 2020. Corrugated box shipments declined during all of these periods, and it is more than a little difficult to view the performance of the US economy in 2025 as truly healthy rather than merely propped up by the wave of AI investment.
This macro trend can also be seen in investment flows. At a headline level, US investment is about as healthy as can be expected given the interest rate environment, but even a cursory examination again reveals an outsized role for data centers and AI. Figure 2 compares real investment in the US economy since 2021, with all of the growth in 2025 coming from the information processing equipment & software segment; investment levels in the rest of the economy have regressed, succumbing to persistently high interest rates, economic uncertainty and the impact of tariffs on costs, with the wave of AI investment contributing by drawing capital and attention away from other sectors. Investment in manufacturing structures has continued on the downward track it began in 2024, a somewhat distressing signal for corrugated demand.
While most box demand occurs at the manufacturing stage of the US goods economy, particularly in the fast-moving consumer goods (FMCG) sector, manufacturing output and corrugated demand are ultimately pulled by consumer spending. When consumers have plenty of room in their budgets, they spend more, including on goods, which in turn drives corrugated demand. Indeed, real income growth can be a powerful leading indicator for box shipments growth — a dynamic well-illustrated by the obvious impact of the pandemic-era stimulus on blowout goods spending and corrugated demand. Figure 4 presents smoothed versions of US real income growth and box shipments, with the income decline of 2022-23 similarly preceding the sharp downward movement for box shipments. Slowing real income growth contributed to the demand stability and potential recovery of 2024 being replaced by further erosion in 2025.
In Figure 4, the year-over-year change by the trailing 12-month average for real disposable income is depicted by the grey line. While this provides a reasonably nice match as a leading indicator for shifts in the direction of year-over-year changes in trailing 12-month box shipments, a major problem with examining the path of headline incomes in 2025 is that the income growth is simply not that bad. In the first nine months of 2025, real disposable income rose by 1.8% compared with average annual gains of 2.6%. Over this time period, average US box shipments growth averaged 1.2%, lagging the growth in headline disposable incomes by 1.4%. Problematically, this suggests that consumer incomes in 2025 have been robust enough to support box shipments growth of about half a percentage point rather than the actual year-to-date decline of 2%. As shown by the grey lines in Figure 5, the gap between box shipments growth and headline income growth has climbed well above its long-term average, superficially suggesting a pronounced decoupling of box shipments with the broader economy and even consumer incomes.
In our view, a more accurate explanation of the 2025 weakness in box shipments is provided by the purple lines in Figure 4 and Figure 5. The “disposable” income measured by US government agencies simply measures after-tax incomes rather than a more common-sense interpretation of “disposable” income as consumers’ remaining budget after paying for essentially mandatory services and goods such as housing, utilities, insurance, health care, energy goods or public ground transportation. Notably, the “truly disposable” real incomes we calculate in Figure 4 do not subtract groceries, which we view as a highly discretionary category and which happens to be the single most important spending area for corrugated demand. The purple line in Figure 4 quite logically climbed much higher in 2020-21 than the grey line because the pandemic-driven shutdowns and lockdowns prevented consumers from accessing or needing to spend on many mandatory areas, with the departure of stimulus in 2022-23 exacerbated by the return of many mandatory categories. Prior to 2020, US consumers benefited from a very mild inflation backdrop that allowed robust growth in truly disposable real incomes, which rose at an average pace of 3.8% per year, more than double the pace of headline income growth and 2.6 percentage points faster than box shipments.
US consumers were perhaps somewhat spoiled by the strength of the nearly decade-long period of strong real income growth in 2011-19, which has been ended by slowing jobs growth and persistent post-pandemic inflation, with the latter being especially pronounced in mandatory categories that crowd out consumers’ budget for goods. In 2025, growth in truly disposable income decelerated greatly, with the year-over-year growth for the trailing 12-month average slowing to less than 1% in September. Because of the stronger pre-
pandemic performance for truly disposable income growth, its long-term average gap versus box shipments is wider than for headline income growth. As shown in Figure 5, this means that the further decline for box shipments in the first three quarters of 2025 was almost exactly in line with what would be predicted by the anemic growth in truly disposable income even though it was much weaker than would be predicted by the growth in headline disposable income. Although structural factors such as the declining share for boxes in the once-dynamic e-commerce segment have also played a role, much of the demand erosion in the first three quarters of 2025 appears to have been driven by pronounced consumer headwinds.
If real “truly disposable” income growth is a leading indicator for shifts in box shipments, it is heading in the wrong direction for a near-term recovery, as the purple line in Figure 4 is somewhat propped up by the use of the 12-month average. The reality of the monthly data is that truly disposable income declined on both a month-to-month and year-over-year basis in August and September. As long as consumers remain under pressure, it will be difficult for box shipments to mount a near-term recovery.
Figure 5 also suggests the economic conditions that may be needed for a return to robust corrugated demand growth. If we should expect a gap between box shipments and real truly disposable income growth of about 2.6%, we would need a return of real income growth of more than 3% for box shipments to make a noticeable move upward. If inflation cools to the Fed’s target of 2%, the nominal income growth that would be needed is about 5%, a reasonable target that compares with the 5.6% gain in 2024 for nominal headline disposable income growth, but the income growth target will rise if inflation does not decelerate. Some good news, perhaps, is that none of the numbers in this article are on a per capita basis, so the amount of needed wage increases will be moderated by any population gains; the bad news is that slowing fertility rates and changes in US immigration policy will likely cramp near-term population growth. Crucially, the inflation picture must include a deceleration in price increases for mandatory spending areas, which will create more room in consumer budgets and more support for packaging demand.
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