Where's the Disconnect

By Andrew Paparozzi
In March 27, 2009

Our previous posting talked about some signs, albeit faint, that the economy may be stabilizing. Since then, additional data on the housing sector and durable goods orders also have put a somewhat better tone on the economic situation. Let’s be clear, “better” is relative to what was looking like an economy in freefall. Data on the job front remains dismal, as the number of individuals receiving unemployment benefits continues to rise sharply. But in this business environment, that’s to be expected. Companies are not going to be hiring until its absolutely necessary. Although the economy may be coming out of its tailspin, the first quarter will show another significant contraction for GDP. The latest consensus from Blue Chip Economic Indicators has inflation-adjusted GDP falling at an annual rate of 5.3% for the period on top of a 6.3% drop in the final quarter of last year.

The first quarter of the year also is proving extremely difficult for the commercial printing industry. In fact, the sales decline for the industry, which according to NAPL estimates averaged 9.3% for the three months ending in December 2008, has moved solidly into double-digit territory during the initial months of 2009. Furthermore, unlike data on the economy, the latest indicators from NAPL’s Printing Business Panel have yet point to any stabilization of business conditions.

Even if business conditions for the industry do begin to stabilize later in the year, and they more than likely will, a further steep contraction in commercial printing industry sales (from all sources) of more than 5% is already baked in for 2009. The extent to which sales actually decline this year will to a large degree depend on industry prices. In March, almost half of the Panel reported their prices were lower than a year ago, while 17% reported their prices being higher. At this time last year essentially the reverse was true. And if history is any guide, pricing pressure will continue even after activity begins to turn around. No matter what the final numbers for 2009 are, they will not be pretty— not for the economy or print. Is there a disconnect between a slightly better tone for
the economy and downright ugly numbers that continue for the industry? There really isn’t one. The recession is still very much with us. Nonetheless, with
structural changes continuing all around us, we cannot emphasize this point enough: It is not too early to think about recovery and begin putting in place those actions necessary to be on the right side of redistribution.

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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