COMMERCIAL PRINTING OUTLOOK — PRINTING WORK TO RUN SHORT

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.”

Another factor contributing to PERC’s modest outlook for 2007 were indications that the gains in pricing power had begun to plateau in the second half of this year, Vincenzino says. “We’ve still seen problems with profitability for printers in 2006. Profitability didn’t improve at the same rate as top-line sales growth.”

Data from the 2006 PIA/GATF Ratios Survey backs up the NAPL economist’s assessment. PIA/GATF reports that the average before-tax profit on sales among printers was 2.7 percent during the latest survey period. That’s a slight increase compared to the 2.5 percent return in 2005, but is still below the 3.0-3.4 percent range experienced from 1995 to 2001, according to the survey summary.

Along with the general slowdown in 2007, NAPL’s Vincenzino says printers will have to contend with greater variation in geographic economies than in the past.

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