The Real Economy

By Andrew Paparozzi
In March 20, 2008

Will the “real” economy please stand up? In recent days, much of the headlines have focused on financial developments: Bear Stearns collapsing, an aggressive Federal Reserve, new initiatives in the mortgage market via Fannie Mae and Freddie Mac, etc. There is little question of the financial system’s ever-growing importance to the economy. However, in the midst of all the turmoil, we shouldn’t lose sight of the activity in the “real” economy—the production and consumption of goods and services. In other words: What’s happening on Main Street.

Unfortunately, the preponderance of data continues to point to a weakening economy. Retail sales, industrial production, employment, let alone the dismal construction data, are telling us that the economy is going through a rough patch—a significant rough patch. If we are able to skirt a recession, it will be barely. And that’s beginning to look less and less likely. In any event, we cannot separate the performance of the economy and sales growth in the commercial printing industry. Along with the economy, the latter has flattened significantly.

Throwing salt in the wound, the reduction in demand has not eased cost pressures. And there’s no guarantee that it will. Higher prices for energy, materials, and labor continue to squeeze profit margins. In February, 38.9% of the NAPL Printing Business Panel reported that profitability was decreasing—the highest percentage in four years. Only one-fourth of the Panel reported increasing profitability. With commercial printing industry sales expected to show their worst performance in five years, defending margins is becoming more critical day by day. When will the “real” economy get on its feet? According to the consensus forecast from Blue Chip Economic Indicators, possibly some time latter this year. But we should note that it’s likely to remain quite wobbly well into 2009.

Joseph V. 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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