Optimism: Warranted or Not?
The recent compromise on tax rates and unemployment benefits that’s currently making its way through the lame-duck session of Congress seemingly has brought forth a spate of optimism. Economic pundits are raising their forecasts for 2011. This is reflected in an uptick in expected GDP growth for 2011 in the Blue Chip consensus in December (2.6%), and the latest Wall Street Journal’s forecasting survey (3.0%). If these surveys were taken today, expectations would probably be somewhat higher with risks leaning to the upside. Is the increase in optimism warranted? In addition to the impending tax legislation, the higher forecasts for next year are reflecting a recent improvement in economic indicators as well as additional stimulus from the Fed’s stance of injecting more liquidity—QE2. The economy is definitely improving, but let’s not get carried away. The amount of stimulus that will be created by the tax-rate compromise remains questionable. Even the upwardly revised forecasts remain in the vicinity of 3.0%—still too low to make a major dent in unemployment. And too low to make a major dent in the economy’s underutilized capacity.
The National Federation of Independent Business’ index of small business optimism increased in November to its highest level in three years, but its level still does not signal expectations of robust growth. A survey from the Business Roundtable showed that CEOs from major corporations are more optimistic about their companies in 2011. As for the printing industry, conditions are definitely showing signs of improving. But here too, let’s not get carried away. In November, the Printing Business Index™ (PBI™) rose to 51.2—surpassing the 50.0 level for the first time in three years. For more on the PBI, see the 12/09/10 post in the State of the Industry Analysis section of NAPL’s Performance Indicators website. Among the various measures that make up the PBI, current business conditions and confidence had the highest readings—each above 57.0. Readings for factory payroll hours and prices remained below 50.0, as companies remain cautious on expanding hours, and continue to face pricing pressure. Pricing remains a significant wildcard as we move into 2011.
Along with the economy, our industry has turned the corner, but we still must remain focused on what we’re doing to generate our own recovery. As a participant in the NAPL 2010-11 State of the Industry Survey commented, “Expectations vs. hope. Everyone is going to be hopeful for a better 2011. What is the reality going to be?” What initiatives have you implemented or intend to implement? To a great extent, reality in 2011 will still depend on us. Don’t let more upbeat data on the economy or the industry cloud your vision, or reduce any sense of urgency.
Andrew Paparozzi Joseph Vincenzino Kong Lue Wang