Market Watch

Market Watch


PIA Reports on Print Market Outlook

According to data from Printing Industries of America (PIA), the 2003 economy should perform close to the long-term trend with real or inflation adjusted growth of approximately 3.5 percent. Expectations for inflation, labor markets and interest rates include:
• Inflation – should continue to check with the GDP deflator up 2 percent from last year. The CPI will probably grow by just above 2 percent.
• Labor Markets – With the economy growing, the unemployment rate will eventually tighten up. However, unemployment is a lagging indicator and the unemployment rate will hover around 1 percent before turning down later this year. For 2003, the unemployment rate will average 5 percent.
• Interest Rates – Overall interest rates should edge up slightly.

2003 print markets are projected to grow close to print’s longer term trend rate of approximately 3 percent. This will mean printing shipments over the year reaching $171.5 billion.

The outlook for print market segments is mixed. Faster growing sectors such as direct marketing books, packaging/ labels and wrappers should expect sales increases of 3 percent to 3.5 percent.

Magazines and periodicals and catalog printing should grow by 2.5 percent to 3 percent as advertising markets recover. General commercial and quick printing should grow in the 2 percent to 3 percent range and directories at approximately one percent. Business from printing is projected to decline by 5 percent or 6 percent.
• Print Labor Markets – The markets will tighten along with the rest of the economy. Total industry employment may edge up slightly from the downsizing of 2001 and 2002 with total hires of approximately 75,000, just about offsetting retirements and other severences. However, print labor markets should still remain relatively loose.
• Printers’ Operating Costs – On the positive side, the loose print labor markets should keep wage and salary costs in check. Also, consumables such as ink, film and plates should not escalate too much. There are two areas of concern for the negative side. Paper costs may begin to edge up as the North American economy grows at a healthy pace along with Europe and Asia. Also, employee health care costs will continue to escalate.
• Printers’ Profits – Printers’ bottom lines should improve next year from the record low of the past year. The average printer participating in the 2002 Ratios survey earned 1 percent before tax profit on sales. Look for overall before tax profits in the 1.5 percent to 2 percent range next year before returning to more normal rates. At this rate the industry will generate approximately $3.2 billion in before-tax profits.

NAPL Reports Increase In Optimism for Next Six Months

Optimism among the National Association for Printing Leadership (NAPL) Printing Business Panel was up sharply in June, with nearly 38 percent expecting business to improve during the six months ahead, compared with 24.1 percent two months before. The economic analysis comes from NAPL’s Printing Economic Research Center (PERC), which produces research publications sponsored by Heidelberg, Kennesaw, GA.

While there is reason for optimism – business will improve as the economy responds to massive stimulus from Washington – a full recovery is likely still a year away, according to Andrew Paparozzi, NAPL’s vice president and chief economist.

“Although there are hopeful economic signs, there is still reason for caution,” said Mr. Paparozzi. “We haven’t yet seen a return of pricing power and profitability – the two hallmarks of full recovery – and are not likely to do so for at least a year.”

Pricing pressure remains one of the printers’ biggest concerns. A record 50.9 percent of the printers surveyed by NAPL reported that prices fell in June, nearly six times the 8.7 percent who reported that prices rose. Pressure on prices increased pressure on the bottom line. Profitability fell in June for 47.9 percent of the Printing Business Panel and rose for 19.6 percent.

Sales were also down. The 6.3 percent drop in May was the fifth consecutive decline in sales and the largest drop in nearly a year.

In analyzing the figures, Mr. Paparozzi noted that “sales are very erratic from month to month. Therefore, May’s results does not mean business is degenerating or that recovery has not progressed.”