Uncertainty Runneth Over

By Andrew Paparozzi
In March 26, 2010

While the economy is on the mend, the widespread uncertainty that has characterized the business environment for more than a year is not dissipating—and even with the passage of health care reform a done deal—don’t expect it to anytime soon. For starters, the confusion over health care is far from being over—it’s just beginning. Furthermore, major issues such as carbon emission controls, and financial regulations, all with significant ramifications for businesses—especially small business—remain unresolved. And who knows what other issues will be coming along. On the surface, these do not appear to be ideal conditions for planning, let alone long-range planning. But it is under unsettled circumstances such as these that planning—both operational and strategic—become even more essential. Yes, the landscape may be uncertain and constantly shifting, but that’s something we’ll all have to deal with. Simply adopting a wait-and-see attitude is not advisable. This is especially true in an industry such as print, where being able to play catch-up is becoming increasingly difficult.

In addition to future demand, a major issue of uncertainty for the business community revolves around inflation and the future cost of doing business. What will my employees’ benefits cost? What about business taxes? Will the Federal Reserve be able to reverse course in time to avert an inflationary spiral? Will a massive Federal budget deficit weaken the U.S. dollar, resulting in sharply higher prices for materials? Will the cost of credit increase, providing I can get credit? These are just some of the questions perplexing business leaders, especially small business owners. It’s little wonder why the Small Business Optimism Index reported by the National Federation of Independent Business (NFIB) has not made any sustained headway since mid-2009.

One of the indicators holding the index down is continued downward pressure on selling prices. And based on the latest data from the NAPL Printing Business Survey this definitely is the case for print. In February, only 12.6% of the NAPL Printing Business Panel reported that prices have risen over the past year. More than two-fifths (41.0%) report lower prices. Price conditions are showing some stabilization, but we’re still seeing comments from Panel members such as: “Losing jobs and customers on price issues alone. It’s tough.” “Cutthroat competitor pricing.” Following our industry’s last recession, prices remained under pressure for the good part of a year into recovery. So don’t expect prices to bounce back quickly, especially in markets hampered by commoditization. This is no time to let up on efforts to boost productivity and efficiencies. For more discussion on commoditization see the 3/22/10 and 3/18/10 posts in the SOI analysis section of Performance Indicators.

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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