State of the Industry: Print and Packaging

Printing Industries of America’s Ronnie H. Davis, Ph.D., vice president and chief economist, and Edward Gleeson, manager of economic and market research, provide an overview of the economy as it relates to general and package printing.

Where will the U.S. economy, print, and packaging trend over the course of 2010 and 2011? The answer to this question depends on the exact path of the recovery from the 2007/2009 recession and the longer term pattern of growth of the global and U.S. economy, along with key dynamics shaping print and packaging. In this article, we assess the likely path of the economy, print, and packaging over the next 12 to 24 months.

Mapping the 2010/2011 economy

The fundamental underlying bias of the U.S. economy is to grow. In fact, since the end of World War II the economy has grown in 90 percent of the quarters and years. Another underlying tendency is that the economy typically gathers strength as it recovers from recessions and grows at above-average rates the first and second full years after the recession ends.

Our current view is that once the data is analyzed, the 2007/2009 recession will be found to have officially ended in the third or fourth quarter of 2009, so 2010 and 2011 should be recovery years. While there is some fear of a "W" recession pattern (double-dip) with another quarter or two of decline, at this time, our outlook is for continued growth, but at a lower-than-typical pace. Also, other important economic metrics, such as unemployment and consumer and business confidence, will remain weak.

At this time it appears that the economic recovery will be modest by past standards, with the economy growing less than 3 percent in 2010 and just 3 percent in 2011. These rates are about 60 to 70 percent of the average recovery pace achieved over the previous four recoveries. Even so, the pace of growth in 2010 and 2011 will likely be higher than the pace of 2012 and beyond, since the first two years of recovery are typically the most robust of the cycle.

Even if the economy performs reasonably well over the next two years as measured by real or inflation-adjusted growth, labor markets and unemployment will lag. Unemployment should remain close to 10 percent into early 2010 before declining at a very slow pace.

With the slow pace of economic recovery and lingering excess capacity, inflation should remain in check at least through 2010, but could start to rise in 2011 with the massive increase in bank reserves over the past year.

Relationships between the overall economy and print

Before presenting the outlook for print over the next 12 to 24 months, let's review the key relationships between print and the economy. A perspective on print's performance relative to the economy is provided by examining the relationship between the economy (inflation adjusted or real gross domestic product (RGDP)) and the Printing Industries of America's Print Market Index, which tracks the difference between printers experiencing increased sales with those experiencing decreased sales. Although the economy is recovering, the Print Market Index remains in extreme negative territory.

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