PrintingNews.com

The economy is on the mend, recovering from a steep recession, and is expected to make a respectable showing in 2010. As for our industry, the free-fall is over. Indicators for both the economy and the commercial printing industry clearly are moving in the right direction. This is all good news—definitely better than what we experienced for much of last year. But, what does this tell us about the prospects for individual companies? Very little, I’m afraid. Recessions result in market redistribution, and the combination of a downturn and ongoing structural change from the Internet and digitization only augments the extent of redistribution that can be expected. There are no guarantees of participating in recovery. As the year unfolds, companies need to focus on answering the following: What must we do to enhance our changes of fully participating in recovery and coming out on the right side of redistribution?

Going in Right Direction
A broad range of NAPL printing business indicators, although still very weak, are moving in the right direction. There is no perfect business indicator, so NAPL combines several key indicators, including trends in current conditions, expected future conditions (confidence), prices, and profitability into a single measure of commercial printing activity.

Sales growth for the commercial printing industry from all sources, not just ink on paper, fell sharply in 2009. NAPL estimates that when results for 2009 are tabulated, revenue from all sources will show a record drop in the vicinity of 16 percent, on top of a 4 percent falloff in 2008. Given the steepness of the downturn in the economy, this shouldn’t come as a major surprise. But year-over-year monthly sales declines clearly are moderating and should begin showing substantial improvement; if for no other reason than year-ago comparisons will become much easier.

However, limiting one’s focus to the industry’s revenue results and linking results solely to the business cycle is likely to prove much too narrow. If it were not, we could then expect an improving economy to begin making everything right again. It won’t. Our industry is not the same as it was ten or five years ago. For that matter, it’s not even the same as it was going into the downturn, and it won’t be the same at the end of 2010 it was the start. We don’t have to search very hard to determine why—structural change continues to evolve. Just look at what’s happening in the social media arena. So, what can we expect in 2010? It all depends. And that statement applies just as much to individual company initiatives, if not more so, than to developments in the general business environment.

As we begin the year, there is little question that the health of the U.S. economy remains uppermost on the mind of many, printers being no exception. In mid-2009, concern over the economy was essentially universal. More than nine in 10 participants (91.8 percent) in the NAPL 2009 State of the Industry Survey cited “the economy” when asked, What concerns you most? “Maintaining profitability” was second with a citing of 71.3 percent, followed by “diminished customer loyalty” (40.8 percent) and “maintaining prices” (39.4 percent). Yes, the economy has shown improvement and has, at least, stabilized in most areas since the survey was conducted. But it is doubtful that concern over the economy has mitigated to any great extent.

The Outlook
When released in late January, fourth-quarter 2009 GDP results are expected to show an annualized gain of about 4 percent after adjusting for price changes—about double the previous quarter’s increase. While we wouldn’t characterize it as a booming economic recovery, the gains are respectable and definitely better than the steep declines we were experiencing. The consensus forecast for 2010 from Blue Chip Economic Indicators, a group of the nations top economists, has improved progressively from 1.8 percent in April 2009 to 2.8 percent this January. The constant upward revision suggests that economic recovery in 2010 may be somewhat stronger than currently anticipated. In other words: The risks to the outlook may have shifted to the upside—a testament to the U.S. economy’s resiliency. A stronger economy is definitely welcome news, but we must remain vigilant in guarding against an onset of “recovery complacency.” A stronger economy, even a booming one, is not going to make everything right again. The industry is not going back to what it was.

Sales for the commercial printing industry are expected to increase just 2 to 3 percent in 2010. While definitely an improvement, the gain clearly is not enough to offset previous declines. Our recovery will be slow at first, with pressures on prices and profitability lingering for most of the year and possibly beyond. And here’s some more sobering news to keep in mind: Even after a recovery in print is firmly established, don’t bank on automatically participating. The nature of our industry is such that achieving sustained success is becoming more and more exclusive.

Commercial Printing Industry Sales

Commercial printing industry sales are not adjusted for price changes and include all services (not just printing). All figures for print sales are NAPL estimates. Source of 2009 and 2010 GDP (adjusted for price changes): Blue Chip Economic Indicators, Aspen Publishers, New York City, January 2010.