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Paper Forecast--Calm Seas Ahead

September 2000
BY CAROLINE MILLER


The paper market is not unlike the direction of the wind: It can change directions at any given moment. For the last year, the price of paper has been blowing steadily upwards. But that may be changing, according to National Association for Printing Leadership (NAPL) Chief Economist Andy Paparozzi. "Things have been pretty interesting since March, when we began to start to see some change in the market."

Each month, the NAPL surveys 500 printers across the country on paper prices and availability. In the past four months, the monthly survey has seen some dramatic changes that indicate rising paper prices may be coming to an end. For the last year, the panel has reported that paper prices were rising. In January 1999, 13.6 percent of the respondents said that paper prices were rising. This trend continued throughout 1999 and the first part of 2000. This past March, the respondent rate hit an all-time high with 81.6 percent of those surveyed reporting that paper prices were rising.

Then suddenly things changed.

"In April, we started to see a move in the other direction—and the drop was rather substantial and dramatic," Paparozzi describes. In April, 76.3 percent of those polled reported that prices were rising. In May, that number dipped again, to 69.5 percent. Then in June, the number of printers reporting rising paper prices fell yet again to 53.3 percent. Finally, in July, the number dropped below 50 percent, to just 45.1 percent reporting that paper prices were rising. In just four short months, the NAPL recorded a 35.5 percent drop in the number of printers reporting higher paper prices.

"For the first time in over a year, we had more of our panel reporting that prices were stable than those reporting that prices were rising," he notes.

The rather dramatic turnaround in the NAPL's paper survey may be one of the first indicators that the upwards pricing spiral that printers saw from the middle of 1999 to the first quarter of 2000 may be coming to an end. "The spiral seems to be unwinding some, not that prices are falling—yet. They do seem to be stabilizing, and that's quite a change from the last five quarters," Paparozzi notes.

Changing Tides
So what's changed in the last five quarters that has had such a dramatic impact on paper prices? Paparozzi traces the paper pricing stabilization back to the Federal Reserve's efforts to slow the U.S. economy. "The printing industry is extremely sensitive to changes in the economy, whether it's up or down," he explains.

 

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