How the Economy May Impact Printing

It has now been six years, most economic observers agree, since the Great Recession in the United States came to an end. The return to milk and honey has been less pronounced; those six years have offered little more than baby steps in GDP growth (even less so for the printing industry). It’s interesting from a historical perspective…a growth phenomenon not seen since pre-World War II.

The commercial printing industry’s fortunes are closely tied to the U.S. economy, following slowly behind, as has been its historic trail. The $100,000 question is, what do we expect it to do moving forward? Well, one of the best measures can be taken by looking backward.

The economy, like a 35-year-old son living in his parents’ basement, doesn’t seem to be in a particular hurry to go anywhere or do anything. So, we celebrate the small victories, which in this case will probably be approximately 2 percent GDP economic growth when 2015 is totaled out. The printing industry itself will likely post growth in the 1 percent range. The performance is somewhat indistinguishable from its last few predecessors, according to Ronnie Davis, senior vice president and chief economist for Printing Industries of America.

Divergent Economic Scenarios

Ronnie Davis, Printing Industries of America

“We’ll probably end up in the so-so range,” Davis predicts. “In the second quarter, we saw some signs of really coming out of this thing. But then we encountered the problems with what’s going on in China and Europe. And, while it’s been just a bunch of so-so years, it is positive growth.”

The truth of the matter is, the country is caught in its worst post-recessional recovery period since the end of World War II. The traditional cycle for a recovery period is six to seven years, according to Davis, and the thought of another recession—sans a healthy period of economic growth—is downright frightening.

That may also be the good news. There are elements of a healthy U.S. economy that are table setters for the next recession around the corner, Davis notes. Since the economy is sputtering, these variables are not precipitating change. The result? A carbon copy performance of the previous year.

“Usually, economic recovery comes roaring back with a 3 percent to 7 percent increase,” he says. “That hasn’t been the case now, though. When you have rapid recovery in an economy, you tend to get a little overexuberant in terms of consumers spending too much and businesses investing too much. Consumers end up pushed against their credit limits and businesses find themselves with too much capacity.

“In this case, consumers are still continuing to pay off debt. That says to me that it will lead to the recovery lasting longer.”

As for the Federal Reserve’s pre-Christmas decision to raise its benchmark interest rate, Davis does not feel it will have much of an impact on printing industry growth.

One Percent Growth...Or Less

Andy Paparozzi, Epicomm

Andy Paparozzi, chief economist for Epicomm, the Association for Leaders in Print, Mail, Fulfillment and Marketing Services, is in concert with Davis in terms of printing industry growth coming in at 0.5 percent to 1 percent for 2015. He cites the Federal Reserve Bank of Philadelphia’s Survey of Professional Forecasters (SPF) median forecast, which projects GDP growth at 2.3 percent.

Looking at 2016, Epicomm expects commercial printing industry sales to grow between 2-3 percent, with the economy and pricing power playing the wildcard roles. Despite continued consolidation, Paparozzi notes that 25.4 percent of Epicomm’s “State of the Industry” participants were able to raise prices in 2015.

“If the economy strengthens and we regain some pricing power…we can hit the upper half of that [2-3 percent] range,” he says. “If not, we’ll end up close to this year’s results.”

So while economic recovery spins its own version of “Waiting for Godot” in the short term, another interesting scenario is playing itself out as we look toward the future of the U.S. economy and, by extension, printing industry growth over the course of the next three years. Could it continue on its present path of sputtering, but still positive, growth? Is there a chance of accelerated growth? Or might we experience a mild recession?

Continued Spotty Growth

Predicting the direction the economy will take is much like meteorologists