Printers may have better luck if they prepare clients for the increases ahead of their implementation, Paparozzi suggests. However, he believes finding ways to offset rising costs may be the only effective response. "Printers need to continue improving their productivity and efficiency, even as business accelerates," the economist advises.
Paparozzi believes paper price increases will have staying power in the second half of the year because of the positive changes in the economy and business conditions. "In terms of the economy, what we're seeing is a rapid broadening of the expansion," he says. "A lot of sectors are now contributing to growth."
For the printing industry specifically, the middle of 2003 marked the beginning of a recovery, the economist points out. By late 2003 and into 2004, printing sales finally started to turn up.
"Sales were up 2.8 percent, year-over-year, for the three month period (December through February). That was the strongest growth we've seen over any three consecutive months since 2000," Paparozzi notes. While the final numbers were still being tallied, he says early data indicated that the positive trend would continue through April.
"What we haven't seen yet is a return of pricing power and profitability," the economist continues. "We may have at least hit a floor on pricing, though, as 63.7 percent of printers responding to our most recent survey said prices are increasing or at least holding steady. The improvement almost entirely came from printers saying prices are holding steady, but that's a start."
The more competitive the industry, the longer it takes to restore pricing power. Print markets used to be local or regional, and now they're becoming national and international as geographic borders are broken down by digitization and the Internet, Paparozzi explains. Competition also is coming from businesses providing an electronic alternative to print.