The Other Shoe….

By Andrew Paparozzi
In October 17, 2008

With major efforts to revamp the global financial system seemingly in place, world markets have turned their attention to mundane economic data—and the numbers for September are looking dismal. Retail sales (-1.2%), industrial production (-2.8%), and housing starts (-6.3%) are just the latest examples. Although underlying conditions may not yet be as weak as these data suggest, no matter how you look at it, the economy is having problems. With these results coming on top of a weak August, the likelihood that economic activity in the U.S. contracted in the third quarter increased significantly. The consolation: Inflation is being restrained as oil prices plunge and retailers cut prices to spur demand. What a way to get inflation under control.

Although cyclical changes are grabbing all the attention, we continue to emphasize this point: Don’t lose sight of structural changes. While the structural changes that have and continue to redefine the print industry did not occur at the lightening speed we recently witnessed in the financial system, they are profound nonetheless—revamping all aspects of the business from competition to staffing. Many of these changes are reflected in the industry-wide consolidation that has and will continue to transpire.

In our previous posting we mentioned that the number of establishments in the commercial printing industry has fallen by almost 6,900 or 24.3% between 1998 and 2008. Note that consolidation has occurred throughout all geographic regions, ranging from a decline of 19.3% in the Plains states to a net drop of 31.0% in New England. See the upcoming NAPL State of the Industry Report, Seventh Edition for more detail.

Consolidation also is quite evident among the states. For the top ten states in terms of establishments (representing almost 54% of establishments in the commercial printing industry), declines ranged from 12.5% in Wisconsin to 33.6% in New York. One would think that such extensive declines in the number of printers would mean less competition for those remaining. On the contrary, structural changes have redefined competition in the printing industry, and have made it more intense than ever. A weak economy is just compounding the problem, making it harder and harder to maintain profitability. Is your company prepared to meet the challenges of rising competition—competition that is coming from all directions?

Andrew Paparozzi
Joseph Vincenzino
Kong 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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