Paper Forecast — Calm Seas Ahead
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.
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.
Because the printing industry is so sensitive to changes in the economy, the June and July data are particularly interesting because they may be the first indicators that the Federal Reserve's interest rate hikes are beginning to take effect and that business is slowing.
"Contrary to what the second quarter GDP report and some of the other national indicators contend, all of our data shows that the economy is, indeed, slowing. That would be my first explanation as to why we are seeing prices level off," he says. "Business is slowing in line with what the Federal Reserve has been trying to do; it is just that a lot of national indicators haven't picked up on that yet."
Even so, there are some printers who disagree with Paparozzi's claim that prices are beginning to stabilize.
Mark Noe, of Broadview, IL-based Lehigh Cadillac Direct, has not seen any stabilization in prices. "The current pricing is somewhat unstable, except for groundwood coated." He also notes that uncoated freesheet is losing some of the year's previous increases. And in the past six months, transactional prices have increased about 5 percent on coated grades.