Forecasting a U-turn
Reading the Signs
Weeks before the announcement came, the possibility of a downward revision in the third quarter GDP numbers was already being considered by Ron Davis, Ph.D., and Printing Industries of America’s (PIA) chief economist and vice president. “Fourth quarter growth may slow down to a little less than 3 percent, but that’s really good compared to declining 3 to 4 percent like the economy had been,” he notes. “In 2009, we’re going to be down 3 to 4 percent again in terms of nominal (not adjusted for inflation) printing shipments.”
According to Paparozzi, the Blue Chip Economic Indicators’ GDP projection for 2010 was already on an upswing prior to the release of third quarter estimates. “Its consensus projections for 2010 have been trending up for months, from 1.8 percent in April up to 2.5 percent in the latest report.”
Too many people believe the end of a recession means everything is going to be OK again, cautions the industry economist. “It simply means that the economy and our industry have stopped contracting. Recoveries can be very vigorous or very feeble, and anything in between. This recovery is likely to be painfully slow at first and not feel much like a recovery until well into 2010.”
NAPL’s forecast calls for printing industry sales to grow between 2 and 3 percent overall in 2010, largely due to the healing U.S. economy. While there may be some revenue growth in the first half of the year, Paparozzi expects profitability to continue declining until the second half of the year with ongoing pressure on pricing. “Given the competitiveness of the industry, we don’t expect to see meaningful recovery until well into the second half of 2010, and even more so into 2011.”
PIA’s Davis currently pegs the percentage growth in the economy in the high 2s—maybe 2.7 percent—for 2010 and possibly increasing to 3 percent in 2011. “Relatively speaking, that’s pretty good. Compared to past recoveries, though, typically in the first one to two years we had growth in the neighborhood of 4 percent,” he notes.