Hot Markets for 2007 — Prepare for Growth

January 2007 BY VINCENT MALLARDI

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DON’T BELIEVE the pundits. The U.S. economy will expand, not contract, in 2007-2008, and to an annual growth rate of nearly 4 percent in GDP. This will reverse the downward adjusted 3.2 percent in 2006 and 2005. Our industry should makeready to run forward at near the GDP rate. The reason: print growth is tied to the “knowledge economy,” which is not calculated into GDP while government, an outlay, is.

Research and development, if treated as a capital investment rather than as an intermediate expense, boosts GDP by 3 percent and the national savings rate by more than 2 percent. The U.S. accounts for 32 percent of the worldwide R&D number, and the payoff to packaging and printing will be exponential during the next two years among the Hot Markets detailed here.

A knowledge dividend will principally accrue to Number 1 publishing/non-newspaper ($112B, +3 percent; with $15.7B to print, +11 percent). The robust value proposition of digital versioning combined with special-effects offset will excite professional/educational books ($4.1B to print, +14 percent) and juvenile/adult trades, CDI and religious publishing ($3.0B to print, +14 percent).

Conversely, periodicals ($6B to print, -2 percent) will continue to decline in ad/circulation revenues, as will the number of heatset full webs. Other/non-traditional publishing ($1.6B to print, +14 percent) will be dominated by foreign language/content publications coming onshore and newspaper FSIs. Greeting cards ($1B to print, +4 percent) are losing ground to upstart e-cards as production and distribution costs of conventional printed products drive higher prices. Specialty finishers have to migrate to packaging and fancy publication covers and inserts.

At Number 2 will be banking and insurance ($3.02T, +6 percent; with $15.6B to print, +2 percent). Commercial banking ($11.6B to print, +2 percent) is the largest direct mailer and a major demander of signage, outdoor, transit, forms and stationery. Mergers will slow to smaller banks, limiting category growth, but the buyers will be foreign-based financial institutions. Name changes!

Insuring a Strong Future

Property/casualty insurers ($1.9B to print, +5 percent) and life insurance ($2.1B to print, +5 percent) are rebounding as rising real estate values, personal debt and an aging population demand greater coverage. Related is Number 10-ranked investment brokerage ($873B, +15 percent; with $8.5B to print, +7 percent) where investment banks/syndication ($3.5B to print, -11 percent) will nearly equal securities brokerage ($3.6B to print, +3 percent).

The largest spate of across-the-board consolidations will exceed the record in 2006 and bring tremendous demand for open-web, sheetfed and hybrid/digital financial printing. Also bigger in branding will be the exchanges. NYSE Group’s merger with Euronext NV, its acquisition of Marco Polo Network, and the NASDAQ/London Stock Exchange (LSE) link-up, underscore globalization of trading and investing. Initial public offerings will also shatter the ’06 record, which overturned the previous record in 2000. Mutual funds ($1.4B to print, +55 percent) in post- consolidation will come back with direct mail and ROP marketing. Number 3 medical products/pharmaceuticals ($373B, +3 percent; with $12.9B to print, +4 percent) will be led by pharmaceuticals and wellness ($8.3B to print, +7 percent) as new and rebranded medicines come to market and as government intervention impels generics. Packaging, point-of-purchase (POP), ROP and bind-in placements will be at half last year’s growth because of price and regulatory pressures. Medical products ($3.0B to print, -6 percent) and biotechnology ($0.8B to print, -14 percent) will slash print buys as Congress and class-action lawsuits hamstring product introductions.

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