The Rule of Holes…and Paper Rolls
The First Rule of Holes is: “If you find yourself in a hole, stop digging.” If you Google “Rule of Holes” you’ll find lots of additional rules, and several different versions of the Second Rule of Holes, but to my way of thinking, the Second Rule of Holes is: “When you stop digging, you’re still in the hole.”
The Great Recession was a great big hole in the economy. The recession is over; we stopped digging. But, we’re still in the hole. That’s why the recovery doesn’t feel very good.
So, how big is the hole for paper and print, and will we get out in 2011?
The Federal Reserve’s index of industrial production for print and related support activities is a good indicator of print activity. Paper demand is another. From 2007 to 2010, the Federal Reserve Index fell by 23 percent. During the same period, paper demand fell by 19 percent. Actually, paper demand fell by 24 percent from 2007 to 2009, and bounced back by 4 percent in 2010.
What do these indicators tell us about what lies ahead? To get some insight into that question, it’s helpful to look back and see what was happening before the recession.
From 2000 to 2007, the Federal Reserve Index fell by 8 percent and paper demand fell by 3 percent. The difference can be attributed to a number of factors, but no matter how you look at it, the trend for print and paper was flat to slightly negative before the recession.
There was a little bounce-back in paper in 2010, but no bounce back in print. In fact, The Federal Reserve print index hit bottom in March, and then fluctuated in a narrow band, actually hitting a new low in December.
The conclusion: While there may be a little recovery as advertisers catch up on print that was delayed rather than cancelled, the numbers suggest this will be minimal at best. We can’t expect to return to pre-recession levels for paper or print, or anything close to it. The numbers suggest that any bounce back will be minor, and we will then return to pre-recession rates of decline of 1-2 percent per year, from this new lower level.