10.09.09
What Lies Ahead in 2002-2003?
Although there are some major uncertainties that could still derail the economic recovery, it should stay on track, according to the Printing Industries of America (PIA). The major concern is the lack of a stock market rebound. Past history indicates that stock markets usually experience a significant rebound within six to eight months of an economic turnaround. However, the overvalued markets of 1999 and 2000, combined with the terrorist threat and accounting scandals, has so far delayed a stock market recovery.
Assuming this does not become a deterrent, the economy should post modest growth in the range of 3 percent to 4 percent over the rest of the year, slower than the 6.1 percent exhibited during the third quarter, but in line with the economy’s long-term growth potential, according to PIA. Inflation and interest rates should remain low as unemployment levels off and starts to decline.
PIA’s economic and research department, working with analysis from the economics department of the American Forest and Paper Association and data from the Institute for Supply Management, has developed a predictor of printing demand two quarters into the future. PIA’s Print Market Leading Indicator is based on the relationships between the Institute for Supply Management’s PMI, a composite diffusion index of five seasonally adjusted indexes and print sales as measured by PIA’s Quarterly Market Survey.
The Print Market Leading Indicator will provide PIA members with up-to-date forecasts of printing demand three to nine months in the future that they can use to develop their own short-run sales forecasts, help with planning and coordinating for staffing needs, assist in equipment purchase decisions and create annual budgets and plans.
According to PIA, the Print Market Leading Indicator currently points to robust print sales over the third and fourth quarter of 2002. Printers should look for sales to be up significantly from last year’s third and fourth quarters. Print sales are forecast to be up 8 percent in the third quarter 2002 over the same period 2001, and 10 percent in the fourth quarter 2002 over the fourth quarter 2001. Further, first quarter 2003 sales are forecast to grow 6 percent over the first quarter of 2002.
At this pace, total U.S. print sales over the course of 2002 should amount to roughly $166.6 billion, up nearly 4.5 percent over 2001 levels. This is slightly ahead of PIA’s earlier forecasts.
According to the Print Market Leading Indicator, the 2003 economy should perform close to the long-term trend with real or inflation adjusted growth of around 3.5 percent. Inflation should continue in check with the GDP deflator (the broadest index of inflation) up about 2 percent for the year. The unemployment rate should drop as the economy grows. However, unemployment is a lagging indicator and the unemployment rate will likely hover around 1 percent before dropping later this year. For 2003, the unemployment rate will average about 5 percent. Interest rates should rise slightly.
2003 print markets are projected to grow close to print’s longer term trend of about 3 percent, meaning shipments for 2003 should reach $171.5 billion.
Individual markets are projected to see mixed growth in 2003. Faster growing markets, such as direct marketing, books, packaging/labels and wrappers, should see growth in the neighborhood of 3 percent to 3.5 percent.
Magazines and periodicals and catalogs should experience growth in the range of 2.5 percent to 3 percent as advertising markets recover. General commercial and quick printing are projected to grow in the 2 percent to 3 percent range and directories around 1 percent. Business form printing is likely to decline by 5 percent to 6 percent, according to the indicator.
Loose print labor markets should keep wage and salary costs in check, and consumables such as ink, film and plates should not escalate greatly. Paper costs may edge up as the economy grows and employee healthcare will continue to escalate.
Profits should grow modestly over the next year, but will still be drawn down by slow sales during the first half of 2002. Look for overallbefore tax profits in the 1.5 percent to 2 percent range during 2003, before returning to more normal rates, according to PIA.
Sustained Recovery Eludes Industry
Key printing industry indicators, including work-on-hand, confidence and the Printing Business Index, increased in August, reversing weak performance in the two previous months, as the number of printers reporting an upturn in business rose above those reporting a slowdown. However, rather than signaling the beginning of a steady recovery, the National Association of Printing Leadership (NAPL) forecasts that the up-tick is part of a peak and valley trend that has been prevalent of late.
NAPL forecasts that print sales will decline around 2 percent this year, less than last year’s 4 percent decline, but marking the first time in nearly three decades that industry sales have declined two years in a row. Next year will bring a return to positive growth, but NAPL has revised forecasts from an original estimate of a 7.5 percent increase in 2003 down to 6.5 percent.
The NAPL Printing Business Index (PBI), the association’s most comprehensive measure of print activity rose to 51.2 in August 2002, the first time since April that the reading has surpassed the 50 mark, the point at which more printers report business growing than declining.