Hot Markets for 2005 -- Ringing in the New Year
by Vincent Mallardi
The New Year economic forecast calls for gross domestic product growth of 3.8 percent, compared to a less-than-forecast 3.5 percent GDP change in 2004. This nascent "recovery" will provide a 5 percent printing sales increase—but with less value-added.
Energy costs and a runaway international trade deficit are sapping economic vitality, especially in capital investment. Interest and inflation are moderately increasing, which means that deflated (or constant dollar) GDP could slide to zero or less, with real printing sales change diminishing to around 3 percent. This is also occurring in the European Union.
In this shallow environment, the smart money will follow the arguably dumbest.
Government/federal and state ($3.93 trillion, +5 percent; with $3.6 billion to print, +12 percent) will continue as the biggest demander of saddlewire books, direct mail and business forms, though ranked overall at number 23.
Health and human services ($1.2 trillion, +14 percent; with >$1 billion to print, +12 percent) and social security, entitlements ($550 billion, +6 percent; with $0.5 billion to print, +5 percent) will be the best bid-to categories. Defense and homeland security ($448 billion, +5 percent)—the billion dollar buyer in 2004—will be very guarded and tight in the New Year. Be aware that nearly three times the number of printers will be seeking work from governments, marginalizing markups.
State governments ($1.57 trillion, +5 percent; with $0.7 billion to print) will dramatically increase borrowings to lock in pre-inflation interest rates; good news for financial printers.
The highest achievement, and most profitable, private sector is banking/insurance ($2.65 trillion, +5 percent; with $14 billion to print, +8 percent). Commercial banking ($9 billion to print, +20 percent) will be the biggest double-digit growth category as consolidation continues, and institutions are permitted to issue charge cards other than from MasterCard and Visa. Bank on substantial personalized digital communication and signage, but not on paper payment documents. "Check 21," passed by Congress last year, will reduce demand by perhaps 20 percent in '05.