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Commercial Printing Outlook : New Year, Similar Outlook

December 2011 By Mark Smith
Technology Editor
Looking ahead to 2012, it seems as   if the commercial printing industry, the country as a whole and even the global economy have been cast in a sequel to the Bill Murray movie that nobody wanted to see made—Groundhog Year. The first draft of the script for the coming year reads much like it did for the past two years:

• ongoing high unemployment rate—check;

• fallout from the banking crisis still causing high foreclosures rates and depressing the real estate market—check;

• gridlock in our nation’s capital as compromise is considered a dirty word by both parties—check; and

• Euro zone countries struggling with debt crises, keeping the global economy on edge—check.

If anything, the challenges that threaten printing industry growth, specifically, have intensified. The most notable is investment in tablets as a printing replacement by government agencies, schools at all grade levels and certain consumer sectors. The other is the attacks on printing, such as Do Not Mail efforts, in the misguided perception that printing is not sustainable, or at least less sustainable than digital alternatives.

There is, of course, the added wrinkle of 2012 being a presidential election year. With Washington approval ratings in the dumps, some hitting historic lows, politicians are under growing pressure to act on the jobs and economic front. However, judging by the collapse of the Super Committee, that motivation is still being out weighed by the need to not be seen as “caving in” to other side through any attempt at reaching a compromise.

Unlike Past Recessions

The recent course of the economy has been an anomaly, according to Dr. Ronnie H. Davis, vice president and chief economist at Printing Industries of America (PIA) in Sewickley, PA. Normally, the strength of the recovery correlates with the depth of the recession, but that hasn’t happened this time, Davis points out.

In comparing the 2007-09 and the 1981-82 recessions, there is a “tremendous recovery gap,” he says, which has resulted in lower growth of around two to three percentage points in Gross Domestic Product (GDP), or approximately $300 billion to $450 billion in lost output and millions of lost jobs.

“The pace of economic growth in the first half of 2011 was dismal—0.4 percent in the first quarter and 1.0 percent in the second quarter,” he continues. “The recovery picked up in the second half of the year, with the preliminary growth rate for the third quarter estimated to be 2.5 percent. Most likely, the economy will end 2011 with a full-year growth rate of around 2 percent.”

PIA’s estimate calls for printing shipments to finish 2011 up about 3 percent on a nominal basis (not adjusted for inflation, which has been running in the 3.5+ percent rate for much of the year) and end the year at $148.9 billion, according to Davis. That is still well below the industry peak of $174.6 billion in annual shipments recorded in 2007, he notes.

“At the current time, I believe the economy will continue a slow recovery from the recession. While a return to recession is very possible, especially since the recovery has been so tenuous, the most likely scenario is for economic growth of around 3 percent in 2012. The largest unknown, of course, is the outcome of the national elections of 2012 and their impact on federal tax and spending policies—both over the short and long term,” the chief economist adds.

If the economy trends as projected, Davis expects the overall print market to continue its current grow trend, with the 2012 national elections providing some additional boost. “All in all, our projection is for total printing shipments to increase around 3 percent (on a nominal or non-inflation adjusted basis) in 2012, or to approximately $153.4 billion.”

The National Association for Printing Leadership (NAPL) continues to base its industry analysis on the Blue Chip Economic Indicators consensus, which recently was calling for GDP to grow just 1.7 percent in 2011, after growing 3 percent last year, reports Andrew Paparozzi, chief economist and vice president of the East Rutherford, NJ-based association. “We expect industry sales to be essentially flat this year, somewhere between up 0.5 percent and down 0.5 percent.”

(Paparozzi calculates his industry numbers in real, or inflation-adjusted, terms.)

What’s behind the disappointing industry outlook is the continued pressure on prices, says Paparozzi. That growth/loss percentage range obviously isn’t what the industry would like to see, but “it’s a lot better than where we’ve been, with sales down 1.7 percent in 2010, -15 percent in 2009 and -5.3 percent in 2008. It shows that our industry continues to heal—albeit painfully slowly and maddeningly inconsistently—from the Great Recession,” he asserts.

NAPL’s take on the economy and the printing industry in 2012 is for the numbers to be a little better than 2011, “but nowhere near strong enough to solve anyone’s problems,” according to its chief economist. Currently, the Blue Chip consensus is for GDP to be up just 2 percent in 2012, which is very weak for this stage of the business cycle. “We expect print sales to grow between 1 percent and 3 percent in 2012, as recovery from the Great Recession continues.”

No Quick Fix to Problems

Paparozzi says people need to have realistic expectations. Since it took years to create the excesses that caused the Great Recession, it will take years to correct them. With both political parties already in election mode and embracing the risky strategy of getting reelected by blaming the other party, he doesn’t expect to see help coming out of Washington unless the stock market collapses. “Remember, they (Congress and the White House) didn’t pass TARP until the market fell nearly 800 points.”

Actually, there isn’t much Washington can do to dramatically improve the economy because there’s no easy way to wring out the excesses that caused all the problems, Paparozzi concedes. That’s why NAPL’s advice to its members has been to create their own recovery by getting more efficient, more competitive and more valuable to their clients, he adds.

“Get together with your key staff and put together a ’Recovery Manifesto’—a concise, bulleted statement of what you are going to do as a team to make a feeble, disappointing recovery your opportunity and your competition’s problem,” Paparozzi explains.

On the positive side, PIA’s Davis says 2012 could be a turning point. “Next year’s elections may be a watershed election in that we finally begin to tackle our long-term structural deficit. The crisis in Europe has given us a wake-up call,” he contends.

“On a longer run basis, I am optimistic about both the U.S. economy and the printing industry. Our economy has great inherent strengths and a bias for growth. As for printing, my recent book—”Competing for Print’s Thriving Future“—forecasts a return to long-run growth in printing shipments during the next decade based on an analysis of the functionality of various printing sectors,” Davis points out.

That does mean, of course, any real action won’t be taken until at least 2013. So, pop the cork on that champagne, and here’s to hoping it will be a different story come this Same Time, Next Year. PI




The graphic communications industry is facing some very serious challenges, but that doesn't mean there isn't still a lot of life and opportunity in our future. 

Competing for Print's Thriving Future focuses on how printers can create their own positive future by understanding and taking advantage of the emerging changes — the changes that are shaping the printing industry of today and tomorrow. 

Use the research, analysis, and forecasts in this book to: 
• Assess the changes taking place
• Understand the changes
• Design a plan to deal with the changes

Topics include: 
• Economic forces, life cycle, and competitive position
• Place in the national and global economies
• Industry structure, cost structure, and profitability trends
• Emerging market spaces--ancillary and print management services
• Competitive strategies, tactics, and business models
• Key practices of SuperPrinters
• Combating foreign competition
• Social network usage
• A ten-step process to survive and thrive Competing for Print’s Thriving Future

The graphic communications industry is facing some very serious challenges, but that doesn't mean there isn't still a lot of life and opportunity in our future. “Competing for Print's Thriving Future” focuses on how printers can create their own positive future by understanding and taking advantage of the  changes that...




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