Another Encouraging Sign

By Andrew Paparozzi
In June 3, 2009

The Bureau of Economic Analysis (BEA) revised its estimate of first-quarter GDP, which now shows a contraction of 5.7% for the period—slightly better than the initial estimate of a 6.1% decline. However, the more encouraging part of the report was not in the headline GDP data but rather in the estimate of corporate profits. For the January-March period, corporate profits from current production rose $42.6 billion from the previous three months—the first quarterly increase since the second quarter of 2007.

Granted, the increase pales in comparison to the $408 billion decline in profits that occurred during the intervening period. Furthermore, the uptick resulted entirely from a $116 billion increase among financial corporations—profits for nonfinancials continued to decline, albeit at a slower pace. But, as discussed in NAPL Printing Business Conditions: May 2009, “we may be seeing a bottom.” This represents just another sign that we are beginning to see some stabilization in the economic environment.

Something else we’ve been discussing: Don’t just focus on cyclical developments. Regardless of when economic recovery takes hold, not everyone is going to participate. A deciding characteristic: recognizing and acting on structural changes—and not just those within the commercial printing industry, but throughout the economy. According to April responses from the NAPL Printing Business Panel, profitability still was declining for over 70% of the Panel—just slightly better than the record level that reported declining profitability in the previous month. No doubt economic recovery will reduce this percentage further. But companies just counting on a better economy to right their ship at some point are likely to discover they are getting left behind, experiencing an uncomfortable return of choppy waters. For an explanation of structural change and the role it can play in determining industry leaders, see the soon to be released NAPL Strategic Perspective 2009.

Andrew Paparozzi        Joseph Vincenzino        Kong Lue Wang

Andrew Paparozzi

Epicomm's Andrew Paparozzi, Vice President/Chief Economist, is well-known for his accurate and thoughtful discussions on the economy and US commercial printing industry. A foremost author and speaker on economic business trends in the printing industry, Paparozzi heads Epicomm's Printing Economic Research Center.

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