NAPL Economists Advise Taking Strategic Approach to Recovery
PARAMUS, NJ—April 22, 2010—“Economic and industry indicators may be moving upward, but that doesn’t guarantee that individual companies will see their profitability move upward with them,” say economists at the National Association for Printing Leadership (NAPL), who caution that companies “must not lose sight of their strategic focus as activity picks up, but remember they must still reconfigure their value proposition for today’s market.”
Writing in the just released Spring 2010 issue of the NAPL Business Review, Association Senior Economist Joseph Vincenzino points out that the industry is beginning to move towards a sustainable recovery, but that recovery will not happen overnight—in fact, it may still be months away—and it will not provide automatic relief to struggling companies.
“It would be foolish to proceed with blinders on, ignoring the potentially adverse impacts stemming from anticipated policy and regulatory changes,” writes Vincenzino, “but it would be just as problematic to let mounting uncertainty result in passive inactivity—waiting for everything to fall into place. While this is true for most sectors of the economy, it’s especially true for the printing industry.
“Much of what we need to and/or should be doing is not directly tied to any particular stage of the business cycle,” he continues. “These actions are not primarily dependent on the general level of economic activity, and the quicker we come to that realization the better. What should be the basis for our decisions and actions? In large part, it stems from a need to move away from the commodity aspects of our business, and, regardless of business conditions, that’s where much of our attention should be focused.”
(Learn how to leverage “the new rules of recovery” to accelerate your company’s growth this year in a free webinar featuring NAPL Chief Economist Andrew Paparozzi on May 14 at 11a.m. Eastern Time. Register at www.napl.org/SOIWebinarReg)
The NAPL Business Review article details changes in industry activity over the last few months, tracking trends in business activity, pricing, and profitability—and the pressures being exerted on these areas. Among the findings from surveys of the 700+ members of NAPL’s Business Panel:
• Fewer companies report business slowing. Business slowed for 29.8% of companies surveyed, down from December’s 31.5%, and not as favorable as October’s 25.2%, but significantly better than May’s 51.2% and the record high 75.6% in January 2009.
• More companies report business is picking up. Business picked up or held steady for 58.4% in February, up from 56.6% in December, and considerably better than May’s 41.2% response and a record low 19.8% in March.
• Confidence holds on to most of its recent gains. Almost 30.0% of the Panel expect business to improve during the six months ahead. While down slightly from October’s and December’s levels, February’s reading is up from 22.0% last May, and 9.8% in December of 2009—an all-time low, surpassing even the months immediately following 9/11.
• Pricing and profitability show a glimmer of hope. Just 12.3% report prices higher than a year ago, representing modest improvement, but the best readings since January 2009. Downward pressure on prices seems to have peaked in the second or third quarter of 2009. Despite continued pressure on prices, pre-tax profitability ticked up in February, with 21.7% of the Panel reporting profitability increasing, compared to 17.9% in December and 12.7% in October. February’s reading was the highest reading since June 2008.
Because there is no perfect business indicator, NAPL economists have combined several indicators into a single barometer of activity—the NAPL Printing Business Index (PBI). An index reading above 50.0 means more of the companies we survey report activity is picking up than report activity is slowing down; a reading below 50.0 means the opposite.
The PBI stood at 35.0 in December, the same as in October, still quite a distance from the 50.0 dividing line, but substantially above the all-time low of 21.2 in March 2009.
Chartered in 1933, the National Association for Printing Leadership (NAPL) is a not-for-profit business management association representing companies in the $100 billion graphic communications industry. NAPL’s comprehensive slate of business-building solutions provides company leaders with management tools that enable them to make informed business decisions in an ever-changing market environment. For more information on NAPL or its affiliated association, NAQP, visit www.napl.org or call (800) 642-6275.