Commercial Printing Outlook : Don't Rely on the EconomyDecember 2012 By Erik Cagle, Senior Editor
Suffice to say, the 2012 presidential election did little, if anything, to assuage the fears of Americans who have grown weary of partisan politics. President Obama was reinstalled for another four years, Republicans control the House of Representatives, Democrats hold an edge in the Senate. In other words…status quo.
What do the results portend? Another four years of gridlock, perhaps, but minus a crippling recession (start rapping on the nearest supply of wood). But let's view the future with a shamelessly optimistic attitude and imagine that President Obama was right…the previous administration left too ponderous an economic dire straits to be rectified within one term, and that he can be the point person who stems the debt hemorrhaging. And let us take House Speaker John Boehner at his word, that the Republican party will take a more conciliatory approach to governing and work toward realizing a more productive Congress.
Now that we have the U.S. government all but singing "kum ba yah" in harmony, the question becomes: Will the U.S. economy take the express train to full-on, bona fide recovery? And, will the commercial printing industry follow suit?
The answer to both…no, not likely. Even if the stars align and politicians are able to put aside their differences for the greater good, recovery for the printing industry ain't a-happening in any meaningful way. Not in 2013. And, given that 2012 was fueled by a strong load of political printing, there's the belief that the new year won't be as prosperous as its predecessor.
However, all hope is not lost. According to the National Association for Printing Leadership (NAPL), total commercial printing industry sales were projected to rise approximately 0.5 percent in 2012. It ended a string of four consecutive loss years, with sales dropping 0.3 percent in 2011, 1.7 percent in 2010, 15.0 percent in 2009 and 5.3 percent in 2008.
Andy Paparozzi, chief economist and vice president of the East Rutherford, NJ-based association, points out that sales are now 20.5 percent below pre-recession (2007) levels. As for the economy itself, Blue Chip Economic Indicators estimate that Gross Domestic Product (GDP) will grow 2.1 percent in 2012, an improvement over 2011's 1.8 percent growth, but short of the 2.4 percent growth realized in 2010.
As for 2013, the NAPL expects industry sales to grow somewhere between 1.0 percent and 2.5 percent. Where it actually falls on the spectrum is dependent on prices; a firming of prices means the industry will finish in the upper half of the range, Paparozzi says. As for the economy, Blue Chip Economic Indicators estimate the GDP will grow only 2.0 percent next year.
Paparozzi notes that while the economy continues to heal, he continues to remind observers of NAPL's prediction of a protracted recovery period. The Great Recession ended in June 2009 but, while the contraction has stopped, all is not quite well.
"As NAPL has long emphasized, this time recovery would be painfully slow and maddeningly inconsistent, because there is no easy way to purge the excesses—the debt, the housing bubble, the toxic financial instruments that spread the crisis worldwide—which caused the Great Recession," he says.
"Furthermore, the excesses are resistant to conventional remedies. For example, holding interest rates at record lows isn't as effective when qualified borrowers can't secure (or refinance) credit because the value of their homes has declined dramatically. And lowering taxes isn't as effective when households and businesses prefer to delay major purchases and investments until the future is a little more certain."
The economy seems intent on lowering expectations and yet still disappoints observers with its inability to hit even the least optimistic marks. Dr. Ronnie Davis, senior vice president and chief economist at Printing Industries of America (PIA) in Sewickley, PA, points out that the economy was taking on the appearance of recovery mode in 2011, but ended up spinning wheels this year. He was less optimistic of growth hitting 2.0 percent.
As for the industry, Davis felt printing would get a nice bounce from the rash of election-related printing. But even in a presidential election year, enthusiasm is somewhat tempered. Like Paparozzi, Davis is projecting less than 1.0 percent growth for printing.
As for 2013, Davis sees several variables at work. "It will be interesting to see what happens with postal reform, Saturday delivery and patching up some of these issues on the pension side," he says. "Among the bigger issues—the gorilla in the room—is the global economy itself...what's going on with China and Europe. Even though, in an ideal world, we would get our own fiscal house in order and address some of our domestic issues, we're still looking at the other 75 percent of the global economy that's not us. The big question is whether the global economy can stabilize and start to move forward."
Rather than waiting for recovery, Paparozzi is encouraging printers to take the bull by the horns. He notes many printers aren't waiting for the economy or Washington to provide help. Instead, they're satisfying a broader range of client needs, getting involved in customers' projects earlier and staying involved longer.
Referencing a recent NAPL State of the Industry survey, Paparozzi points out that three printing services—digital color, variable data digital color and wide-format color—were cited by respondents as being those expected to grow the fastest during the next two to three years. However, while they were the most popular services, Paparozzi is most encouraged by the wealth of diversity in the services listed by survey responders: Web-to-print, signage, fulfillment, 1:1/cross-media marketing, database management, Web page creation/hosting and video for the Web.
"Bottom line: Many CEOs and owners are finding plenty of opportunity—just not in the same old places or by doing the same old things," he says.
Davis is forecasting economic growth on the order of 2.0 percent for the nation, with the industry breaking about even. He doesn't envision another recession visiting the economy, but notes that long-discussed but oft-ignored hot spots such as the expiring tax cuts and righting the social security and Medicare ships need to be addressed, lest fate be tempted.
"Print fares better in a mature economic recovery, so if we can have a sustained recovery of 3-plus percent, we'll see print pick back up," he says. "There are issues with print as an information media, challenged by things like e-books and magazines like Newsweek doing away with its print edition. But printing as a marketing media, and printing logistics with packaging, labels and wrappers—they are fairly strong. They represent 70 percent of printing.
"There's some undue pessimism about printing and its viability in the future. It's still a $160 billion a year industry. We do expect to see some growth in those total dollars during the next few years."PI