Last Wednesday, WhatTheyThink Economics and Research Center Director Dr. Joe Webb presented his quarterly economic conditions webinar, which included a look at the overall macroeconomic environment as well as current printing industry business conditions.
Citing February’s National Federation of Independent Businesses (NFIB) survey, small business optimism has hit a 14-year peak. Presumably this is in response to the recently passed tax reform bill, although, as Dr. Webb pointed out (see below), any actual economic fallout from the tax bull, positive or negative, will likely be somewhat confused until all the implications of the new law have been discovered.
Real GDP for Q4 2017 grew at an annual rate of +2.5%, or +2.8% without inventories. The latest GDPNow forecast for Q1 2018 is +1.8%, while the NY Fed Nowcast forecast for Q1 is +2.88%. Also this week was a very strong employment report, with (via the payroll survey) employment up +313,000 or (via the household survey) +785,000. Even more encouraging was that employees “not in labor force” fell -685,000, and the labor force participation rate was up to 63.0%, its highest level since May 2014 (although it really needs to reach 66%). The employment-to-population ratio hit 60.4%, its highest level since February 2009 (and it needs to reach 62.7%). Even among prime age workers (ages 25 to 54), the labor force participation rate is approaching its pre-recession levels.
So, the million-dollar question (adjusted for inflation, naturally) is: how does the new tax law affect businesses? The tax law caused big write-downs in the fourth quarter, there will likely be a big wave of M&As on the way, and there will be other adjustments, but the fact of the matter is that most businesses don’t—and can’t—understand full effect of the law yet. And there could even (and probably will be) changes to the law, so he road ahead—at least for the next quarter or two—will be a tad bumpy; expect GDP data to be distorted downward until mid-year.
(By the way, in the month of April, WhatTheyThink, in conjunction with the Association for Print Technologies, will be presenting a four-part weekly series of webinars that will take a deep dive into the new tax reform law and what the implications of it are for print businesses of all sizes. The first installment—covering the topics “structuring your business and what to ask your accountant”—launches Tuesday, April 3 at 2 p.m. Other installments will cover capital investment, succession and estate planning, and dealing with international business issues. Keep an eye on WhatTheyThink.com for registration information.)
Printing shipments for January 2018 came in at $6.17 billion, the worst January showing in at least five years (we’re being generous). An important qualification to make about the relentlessly depressing printing shipment figures is that government reporting on our industry (and, indeed, in many industries that have a lot of small and mid-size players) is that the poor health of large establishments can overshadow the relatively better health of smaller establishments. We explore this in much greater detail in our Printing Forecast 2018 special report. Print businesses that have expanded beyond “mainstream” commercial printing into new applications such as wide-format and display graphics, signage, and other kinds of specialty printing, have seen those kinds of applications—many of which are still high-value at present—find great demand in the market. So while we often cite dismal printing shipments data, the fact remains that there are very successful businesses in this industry, there is still great demand for print (we just need to be certain we know what we specifically mean by “print”), and these data are not destiny. We should look at products, applications, and the specific needs of clients, rather than aggregate data that may not tell us what’s really important about the marketplace.
If you had registered for this webinar but were unable to attend (or want to listen again), the webinar archive (slides and audio) can be found here. The next quarterly economic update webinar will take place Wednesday, June 13 at 2:00 p.m. ET. Watch WhatTheyThink.com for registration details.
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