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December 2006 BY MARK SMITH
Technology Editor
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THERE’LL BE a slight hissing noise behind the strains of Auld Lang Syne at New Year’s Eve celebrations this year. It’s the sound of some steam going out of the economy. The slowdown in GDP growth isn’t expected to turn into a recession, but it will have an impact on printing industry sales growth. The one standout will be growth in digital printing.

While it continues to use the Blue Chip Economic Indicator Consensus in its forecasting, NAPL’s Printing Economic Research Center (PERC) is now making that number the upper bound of its economic outlook range, reports Joseph Vincenzino, senior economist. PERC’s analysis had begun pointing to a coming slowdown in the economy starting in late 2005, but the Blue Chip Consensus remained much higher, the economist notes. “It has now moved closer to our view of the economy.”

For 2007, the consensus is projecting the U.S. economy (GDP) to grow by 2.5 percent, Vincenzino says. “We still think there’s risk to the downside, so currently we are using 2.0 percent as the lower end of our 2007 outlook, for a range of 2.0-2.5 percent (adjusted for inflation),” he continues. “The downside risk is mainly due to weakening of the housing market and the resulting impact on consumer spending.”

Looking at the Numbers

Even the more optimistic number is still down significantly from the projection for 2006, which is going to come in at about 3.3 percent growth in GDP, Vincenzino notes.

“Consumers can’t continue spending the way they have mainly because they’ve been using home equity loans to fund their buying, and that source is going to dry up somewhat,” cautions the economist. “Also, the savings rate has been negative for almost a year now. We think it’s going to at least come back to zero; that will have a large impact on consumer spending.”

Arriving at outlook numbers for the commercial printing industry gets tricky, in part, because definitions of this segment can vary. Based on how it tracks the market, PERC is projecting the final figure for overall printing sales in 2006 to show an increase of 5.8-6.3 percent, totaling $87.6 billion to $88 billion, Vincenzino says. That’s up sharply from the increase of 2.1 percent in 2005. (These figures are for all industry services, not just printing, and the percentages are not adjusted for inflation.)

Due to slowing in the overall economy, growth in printing industry sales is expected to moderate down to the 2.2-3.2 percent range in 2007, or $89.5 to $90.8 billion, according to the NAPL economist. Even though the consensus calls for an economic slowdown and not a recession, “it’s still going to have a major negative impact for our industry,” he adds. “For every one percentage point of slowing in GDP growth, our research has shown the outlook for printing sales decreases by more than $1 billion.”

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