07.10.17
Industry sales continue to grow at last year’s modest pace – increasing another 1% and lifting volume to $85 billion in the first quarter of 2017 – but that growth isn’t strong enough to appreciably boost profitability or pricing power, reported Andrew Paparozzi, Idealliance chief economist, in the Summer 2017 issue of the State of the Industry Update newsletter.
“In our January update, we argued that business would begin to accelerate late this year as at least part of the stimulus proposed by the Trump Administration becomes law,” writes Paparozzi. “Since then, some regulations have been rescinded by executive order, but that’s about it. No major economic legislation is moving through Congress and the House and Senate are rapidly approaching their summer recess. That isn’t encouraging.
“We’re holding to our forecast of total commercial printing industry sales growing 1.5% to 3% this year,” he continues, “but if the economy doesn’t begin to accelerate and help isn’t coming, growth in the 1%-to-2% range is much more likely.”
This level of growth, notes Paparozzi, is neither strengthening nor weakening pricing and profitability. Just 17.5% of the State of the Industry research participants report pre-tax profitability is exceeding expectations this year – most credit that to something they’ve done within their own businesses rather than improved business conditions – and only 26.6% have raised prices while more than 66% have held them at 2016 levels.
“Many participants in our research don’t particularly care what the industry at large is going to do,” Paparozzi noted. “They have ambitious growth and profitability targets and carefully crafted plans for hitting these targets. Prudent investment – in areas such as marketing and brand development, labor force development, and capital equipment – is a big part of those plans.”
“In our January update, we argued that business would begin to accelerate late this year as at least part of the stimulus proposed by the Trump Administration becomes law,” writes Paparozzi. “Since then, some regulations have been rescinded by executive order, but that’s about it. No major economic legislation is moving through Congress and the House and Senate are rapidly approaching their summer recess. That isn’t encouraging.
“We’re holding to our forecast of total commercial printing industry sales growing 1.5% to 3% this year,” he continues, “but if the economy doesn’t begin to accelerate and help isn’t coming, growth in the 1%-to-2% range is much more likely.”
This level of growth, notes Paparozzi, is neither strengthening nor weakening pricing and profitability. Just 17.5% of the State of the Industry research participants report pre-tax profitability is exceeding expectations this year – most credit that to something they’ve done within their own businesses rather than improved business conditions – and only 26.6% have raised prices while more than 66% have held them at 2016 levels.
“Many participants in our research don’t particularly care what the industry at large is going to do,” Paparozzi noted. “They have ambitious growth and profitability targets and carefully crafted plans for hitting these targets. Prudent investment – in areas such as marketing and brand development, labor force development, and capital equipment – is a big part of those plans.”