2010 Economic Outlook

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.