What Do Leading Indicators Show?

By Andrew Paparozzi
In July 28, 2009

The Conference Board Leading Economic Index™ (LEI) rose 0.7% in June and over the past six months has gained at a 4.1% annual rate. Seven of the 10 indicators that make up the index were positive in June, with interest-rate spread having the largest positive contribution. The Conference Board Coincident Economic Index™ continued to decline in June, falling 0.2%, but the pace of decline has slowed. In June, the leading index surpassed its coincident counterpart for the first time since March 2006—further evidence that the economy is near a turning point.

But keep in mind that a turning point is just that—a point at which the economy stops deteriorating. The type of recovery we may experience is a totally different question. In any event, while economic activity is still a key determinant of print activity, the relationship is not what it once was. What are indicators telling us about print? The NAPL Printing Business Index™ (PBI), which combines several key indicators into a single barometer of activity stood at 25.8 in May, down from 27.1 in April but above the all-time low of 21.1 in March. (A reading above 50 means more of the companies we survey in the NAPL Printing Business Panel report activity is picking up than report activity is slowing down; a reading below 50 means the opposite.) The April increase was the first in 21 months. Previously our index had fallen over 64.0% from 59.8 in September 2007. The PBI is signaling that our industry’s deep recession may be bottoming, but don’t look for a meaningful recovery any time soon.

While general leading indicators of the economy and the industry are useful and need to be tracked, they are not substitutes for sound internal indicators that pick up significant changes that at some point will show up in production metrics and, eventually, the financials. As noted in Appendix 1—Leading Indicators of the NAPL State of the Industry Report, Seventh Edition: “The more competitive and unpredictable the business environment, the more important quality leading indicators are.” And for the printing industry, there is little debate on either count. Establishing and tracking the vital-few metrics important to your company are more important than ever. In addition to the Appendix mentioned above, for more information see NAPL’s Executive Brief: Vital-Few Metrics Analysis. As discussed in the brief, NAPL’s online Performance Indicators program is designed to assist you in tracking 13 such metrics.

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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