Not as Good as It Looks

By Andrew Paparozzi
In December 11, 2012

Recent government releases may have created some undue optimism. In its revised estimate of third quarter inflation-adjusted GDP, the Bureau of Economic Analysis (BEA) increased the estimate to 2.7% from its original estimate of 2.0%. Similarly, The Bureau of Labor Statistics reported that the nation’s unemployment rate had fallen 0.2 percentage points to 7.7% in November—the lowest jobless rate in almost four years. On the surface, these data seem rather encouraging, pointing to an economy that’s showing some life.

However, when going beneath the surface of the headline numbers, some concern is clearly warranted. Yes, the economy grew at its fastest pace since the final quarter of 2011, and more than double the 1.3% increase recorded in the second quarter. But looks can be deceiving. For starters, much of the improvement in the revision resulted from higher inventories. Not exactly what you want propelling economic prospects going forward. Personal consumption and business investment in plant and equipment actually were revised lower. At 7.7% in November, the unemployment rate has receded significantly from its recent peak of 9.9% (last recorded in April 2010). But, at 143.3 million, employment is still 3.3 million below its November 20007 peak. Furthermore, much of the improvement in the jobless rate can be linked to a reduction in the workforce, and many individuals classified as employed are, in effect, underemployed—working part time.

We must also view recent data from the commercial printing industry with some caution. Total commercial printing industry sales (from all sources) rose 0.5% last quarter, but at $78.2 billion sales are essentially at the same level they’ve been the previous two years and are still more than 20.0% below pre-recession (2007) levels. Quote activity increased in October for nearly 42.0% of State of the Industry participants and volume/production increased for nearly 36.0%. But these data are rising from very depressed levels and not large or consistent enough to boost confidence, especially since pricing power remains elusive and profits are still being squeezed. See the upcoming NAPL Printing Business Conditions: December 2012.

Prospects for next year remain entwined in a great deal of uncertainty, and regardless of whether we avoid the so-called “fiscal cliff” or not, the economy is not
going to provide any meaningful boost to the commercial printing industry. Even if a compromise is reached in Washington prior to December 31, uncertainty is not expected to dissipate a great deal. Overall economic activity is unlikely to snap its string of sub-par performances, and neither is the commercial printing industry. For individual companies, the name of the game remains: Focus on your initiatives and your strategic plan to create your own recovery.

Andy Paparozzi

Joe Vincenzino

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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