Published: August 27, 2015
The first report of Q2-2015 real GDP was +2.3%, and now it's been raised to +3.7%, well ahead of forecaster expectations. On a longer-term year-to-year basis, the growth rate is +2.5%, still almost a full percentage point below post-WW2 average.
Longer term rate +2.5%. The effects of inventory increases is still a major factor in the growth, but there were other positives in the report implying that Q2 was broadly better than originally thought. There are concerns among professional forecasters that the inventory buildup will result in slower growth as those stockpiles are reduced. Considering that two thirds of the third quarter is almost complete, we know that international trade is being disrupted by currency and solvency issues in China and other countries. The Federal Reserve Bank of Atlanta GDPNow estimates that third quarter GDP will be at +1.4%. Please also note a recent chart where we showed important key indicators that have yet to surpass their recession levels from Q4-2007.
Published: August 20, 2015
The per capita value of US commercial printing shipments has stabilized at nearly $270, and the recent change in the direction of shipments in the last year or so has changed the forecasts. Forecast models place heavy weight on recent history, and that fact has changed the forecast for 2020 to remain at current levels. It was not long ago that the models forecast 2020 consumption at near zero, an unlikely outcome, but one worth pondering. Will shipments stay at these levels? That's unlikely, too, as media formats and loyalties are still changing.
Published: August 14, 2015
There are numerous data series that explain that the economy has never recovered from the recession. These are not obscure data series, but mainstream ones. Gross Domestic Product should be the standard for determining the status of an economy (thick blue line). Movements in GDP should be confirmed by other measures. This week's chart uses the start of the recession, December 2007, as the base, which is 100.
Published: August 6, 2015
US commercial printing shipments are up about +3.5% for January to June compared to the same period in 2014. The industry has been restructuring, as employment continues to decline. Usually employment and shipment levels move together in a tight range if not almost in lockstep.
Published: July 30, 2015
Inflation is supposedly tame, but if you're making comparisons of current year financial data to prior years, you still need to adjust for the years when inflation was not. The chart was created from Consumer Price Index data for each of the years specified. When looking at your company history, multiply your data for each year by the multiplier specified. This will give you an approximation for the effects of inflation on your business, and make your historical analysis, especially in the process of budgeting, to be more realistic. Adjusting your data, even in periods of claimed low inflation, creates a sense of more urgent action. Inflation means that to stay at the same level you actually need more dollars. Staying the same is actually a cut.
Published: July 23, 2015
June retail sales adjusted for inflation fell -0.6% compared to May. Month-to-month changes are somewhat volatile, so it's better to look at the comparisons to the prior year. The chart shows that June retail sales were +1.2% compared to last year, the worst comparison since March 2014. There are signs that the economy is slowing again. In the first quarter, real retail sales were +2.6% compared to the prior year, but this second quarter is only +1.6%. The economy always has conflicting positive and negative data, but this downturn in a key sector of the economy is likely to raise some eyebrows among economists and policymakers.
Published: July 22, 2015
The NFIB Small Business Index was released this week, “The weakness was substantial across the board, showing no signs of a growth spurt in the near future,” according to Bill Dunkelberg, NFIB Chief Economist. “Declines in spending plans accounted for 30 percent of the Index decline, and weaker expectations for real sales and business conditions another 20 percent. The deterioration in earnings trends accounted for about a quarter of the decline.”
Published: July 10, 2015
Commercial printing shipments have been much higher than they are in today's market, but the bounce off the lows of 2014 this year have been notable. The comparisons toward the end of 2015 will be harder to top since the industry started to show this bounceback at the end of 2014. The transformation of commercial printing businesses has been an arduous one, with volume declines of many mainstream products, but a rise in specialty applications. Those new applications are often based in digital printing, such as wide format specialties. There's also a new generation of print business managers who are not burdened by the myopia of history, where print was paramount. These executives and owners have grown up with computers and gadgets and have a better sense of print's new role in media communications
Published: June 25, 2015
We all know how the markets seem to panic when the Fed hints that rates will be rising soon, but they already have. That is, the markets have been pushing up the inflation-adjusted 10-year US Treasury since September 2011 by 420 basis points (4.2 percentage points). The rate is now the highest since June 2010, at 2.33%. This measure can be volatile because of the inflation adjustment. We used the year-to-year inflation rate as measured by the Consumer Price Index for that reason. There are Fed governors who believe that they have great latitude to be patient with a rise in inflation since their target of +2% annual inflation has not been met. This means that they believe they have a cushion of “banked” uncreated inflation that they can use up before they move aggressively. Whatever the case, a 25 basis point rise in short term rates is not much, as they might actually be catching up to the marketplace that has already moved and the Fed is already lagging well behind it. They miss an important point. The CPI does not measure inflation in a practical way. If wages are stagnant (though a little better lately), a “mild” 2% rise can be a burden. Median household income is still 4% lower than its peak just after the recession started. A 2% rise in inflation plus the 4% lower income is a 6% difference. That's something that's rarely mentioned in the business press.
Published: June 18, 2015
Since the start of the recovery all the way back in mid-2009, advertising agency revenues have increased by +$32 billion, +40% since that time. There are many economic indicators that have never recovered (such as full time jobs) but ad agency revenues have blown through the pre-recession high of $91 billion and is now running at the rate of $112 billion annually. The agencies have had this performance because they are immersed in the media upheaval, riding and stoking the changes in communications formats on behalf of their clients. Wages have followed this shift in media, and has been documented by us before. The average public relations pay is about $10,000 more than the averaged of all agency wages. Book publishing industry revenues have stabilized, and trends of newspaper and periodical publishing revenues are still down, but at a lesser rate.
Published: June 11, 2015
In spite of recent strength in US commercial printing industry shipments, employment is still on a downward path. The industry seems to becoming more efficient, somewhat from better management, and somewhat from consolidation as weak establishments are aborbed or exit the market. Compared to April, however, the Bureau of Labor statistics estimates that employment increased by about 600, which is common compared for May in recent years. The April public relations employment was very strong compared to the prior year and is up +8.8%. When PR employment is excluded from ad agency employment, the number of employees in agencies is still up +2.1%. The employment data have always reflected the changes in the media market as well as the strength in the economy. Though the economy is slow, advertising agencies have reinvented themselves and are very active in social media and digital media production.
Published: June 4, 2015
This chart shows how the US commercial printing shipments have been better compared to the prior year for the last 11 months of reporting by the Commerce Department. What's it mean? We're still averaging $400 million per month less than a similar period in 2010-2011, and we're well below the levels of ten years ago by about -$2.8 billion per month. The recent stability may be the result of several factors. First, weak companies are gone as a result of closures and consoPrinting Shipments Rising, Best April Since 2010lidations, leaving companies that know what modern print users need. Second, there has been a generational change in management to owners and executives who are more comfortable with digital technology because they have always used it, growing up with cell phones, video games, and computers everywhere. Third, the big targets for displacement by digital media have been pulverized, and what remains are specialties and applications more appropriate to a multichannel integrated media marketplace. Fourth, there a more companies using business development techniques (tell us about your target audience and how we can make your digital initiatives more effective) rather than old sales techniques (would you like to see my equipment list?). Then again, it could be the calm before another storm. New data networks are on their way, such as 5G, where two hour movies can be downloaded in six seconds rather than six minutes. Print has a good story to tell, but please, don't make it an old story. Print needs to be fresh and new. The market may be stable now, so use this time well to get ready for the market ahead.
Published: May 28, 2015
The Commerce Department released its “Nonemployer Statistics” data for 2013, showing that these businesses increased to 23 million since 2012, and by 30%, three times the rate of population growth, since 2002. Let's call them “microbusinesses.” They are now more than one in seven of the workforce.
Published: May 21, 2015
Last week, the US Department of Commerce released its annual revisions to manufacturing shipments. Printing shipments estimates were increased a total of approximately $10 billion combined for 2013 and 2014. The data softened the decline in 2013 shipments by a considerable margin and also reaffirmed the recent rise in printing shipments over the last ten months. While shipments in 2014 were still below 2013 on an inflation-adjusted basis, the pattern of the last few years shows a decline in shipments that is more muted than the Commerce Department originally reported. Our advice is the same: this is breathing room that can be used for restructuring of print businesses with forward-looking strategies that can take advantage of the next waves of communications technologies, while implementing sales and marketing processes that are appropriate for the times ahead.
Published: May 14, 2015
These data about US commercial printing establishments are from the newly released 2013 County Business Patterns published by the Bureau of Labor Statistics. At the turn of this century, there were nearly 38,000 establishments engaged in commercial printing and services; in 2013 there were nearly 27,000. These data do not include inplant printing departments or packaging, but do include label printers and trade services. An establishment is a separate location in a practical definition, and a firm can own more than one establishment. The number of establishments is in response to the size, scope, and nature of overall print demand, but there are other factors.
Published: May 8, 2015
The last ten months of US commercial printing shipments have increased +3% compared to the same months of the prior years. For the first calendar quarter, shipments are up +3.5% compared to the same quarter of 2014. There has not been this kind of growth for about ten years. Please note, however, that the Commerce Department is revising at least three years of historical data next week; it's not possible to determine how the data will change. Assuming the pattern of these data remain the same, it's not a long term bottoming of the shipment level that will turn upward again. The march of digital technologies that offer alternatives to print will continue (read what 5G networks will bring in 2020, for example). It's more likely a pause that should be used to reposition well-running print businesses for the future, consider investing in capabilities and businesses that will take advantage of the new communications innovations ahead, and develop alliances with others whose talents will be needed to do so. This might be 2005-2007 playing out again for us. If your business is growing, don't rest on your laurels. Appreciate the flexibility your business has to prepare for the future and use the time wisely. Never hunker down and wait for things to play out.
Published: April 30, 2015
The 2013 County Business Patterns report was just released by the Bureau of Labor Statistics, one of the most valuable of all government economic reports. The data are based on Social Security tax filings made by employers. In this manner, the BLS can count the number of business establishments and the number of employees of those establishments with great accuracy from analysis from the mandatory filings of Form 941, submitted with company payroll taxes. As the data show, content creation businesses have much higher per employee annual salaries. This makes these industries very attractive to new employees, especially those starting their careers. The most interesting to me is the rise in public relations agencies. In the late 1980s, the payroll for ad agency workers was about one-third more than public relations. In 2005, they were about the same. In these 2013 data, PR employees are paid about one-eighth more.
Published: April 23, 2015
The Bureau of Labor Statistics publishes many indexes of inflation, the best known of which is the Consumer Price Index. The BLS also publishes hundreds of other indexes in the Producer Price Index (PPI) series that track price changes in industries, products, and commodities. This week's chart shows the year-to-year change in CPI (orange line) and the PPI for printing (blue line) on a monthly basis for a little more than ten years. For most of that period, printing prices have lagged consumer prices, often by wide margins. Since December 2004, printing prices are up +14% while consumer prices are up +27%. That is, printing prices are increasing at about half the rate of consumer prices. Or, looked at differently, printing prices are about -10% less than the change in consumer prices: print is getting cheaper every day. But print owners and their workers cannot spend printing dollars when they go to the supermarket; they have to make up for the 10% shortfall in prices somehow. This is difficult since many of the prices printers need to pay for wages and materials more closely follow consumer prices. It's a double-edged problem: lower revenues, higher costs. Profit leaders have figured out how to survive in this environment as they still stand out from their peers. But these double-edged pressures have caused weak companies to leave or offer themselves as consolidation candidates.
Published: April 16, 2015
The monthly NFIB Small Business Index took a step back after it nearly reached the pre-recession high. The chart shows that high of a few years ago as a green line. The index fell almost to the bottom of the 2003 recession level. For a few years the Index seemed range-bound between that recession and the lows of the recession of the early 1990s (the two red lines). This particular survey had all ten elements of its index fall, which is highly unusual. The Index bears watching as there are very few data series that follow small business activity.
Published: April 9, 2015
The average number of employees in commercial printing establishments has declined over the years for many reasons. Among large printers, volumes of magazines, catalogs, inserts, and other long run length products produced on web offset and gravure presses have declined, leading to plant closures and consolidations. Desktop publishing shifted work to graphic designers, publishers, and other content creators. That, combined with direct-to-plate and digital printing have nearly eliminated the need for prepress departments. Presses require less staffing than older ones. In smaller printers, copies and digital printers have reduced the need for press operators. Other technologies, such as search engines, e-commerce, advances in administrative software have reduced employment in other functions. Even voice mail, cell phones, and e-mail have gradually reduced the number of staff required to run a printing business.
Published: March 26, 2015
The chart shows one of the rates for Treasury securities called the “constant maturity rate,” used to set rates for instruments like mortgages. The line in the chart is that monthly rate less the year-to-year change in the Consumer Price Index for that month. The Fed has worked hard to keep their interest rates below inflation to stimulate the economy, as well as make housing prices rise so that fewer mortgages were “under water.” It hasn't worked that well, but that's a different topic for a different day. But with all of the worries about the Fed raising rates, the combination of their inertia and changes in the inflation rate may be producing what they've wanted: a Seinfeldian case of “nothing” becoming something. At the end of 2011 the real rate in the chart was -3%, and the last observation in the chart is about +1.5%, a 450 basis point move. For about three years, the CPI has been below the Fed's target of 2%, and in December and January it was negative. February CPI was just reported as an annualized 2.4%, so this rate rise may disappear soon
Published: March 19, 2015
On Wednesday, March 18, the Feb removed the word “patient” from the announcement of a potential rate hike, but as the Washington Post explained “Well, the Fed really said that it's going to be more patient than it was before, even if it's not officially so. In other words, it could hike rates at any time starting in June, but it's less likely to do so. And even when lift off does happen, it'll probably happen slower than people thought it would.” There you have it: Janet Yellen does a great Alan Greenspan impression. No one knows what he meant but everyone knows what he said. Dr. Yellen also explained that while the Fed is no longer in the act of quantitative easing, they are replacing all of their holdings as they mature. What got less coverage is that the Fed lowered their forecasts of GDP. For 2015 and 2016 they lowered their prior forecasts by three-tenths of a percentage point. Each tenth is about $150 billion. So their forecast was reduced by $450 billion, or the equivalent of six commercial printing industries. Such data analogies can make one's head spin.
Published: March 12, 2015
Don't let four jagged lines on a chart confuse you, because there's good news hidden inside. The labor market is very dynamic, more dynamic than commonly understood. About 2% of the workforce quits jobs every month, and between 1.5%-2% separate from their positions in other ways because their projects are completed, fired for cause, or downsizings. About 3% of the workforce is hired in different positions every month. What's made the improvement in total employment this past year is the increase in job openings (the blue line in the chart). Note that it has a higher upward slope than the other lines. The number of job openings is now around 5 million per month, more than double that when the recovery started in mid-2009. The bottom line, in red, is “quits.” Most workers do not quit their jobs unless they have something better lined up. That line has a general upward slope, and it is common for this to increase as economies improve and workers feel more comfortable changing positions. Though not population-adjusted, the lines are definitely moving in positive directions, with job openings as the most encouraging of them. What's this mean to printers? Never consider your business contacts in companies as “safe.” As economies improve, job changing increases. Be sure to have multiple engaged contacts in your most important clients. Also, be sure your key employees are kept “gruntled” because disgruntled key employees can be valuable elsewhere.
Published: March 5, 2015
There is a general (and natural) assumption that commercial printing and the economy as measured by GDP move together. The chart below shows the year-to-year percentage change of the two data series, GDP in red and printing in blue. The chart tracks current dollars and are not adjusted for inflation. Except for a brief period from the second quarter of 1995 through the first quarter of 1996, shipments have lagged GDP growth. What was special about that period? The Internet bubble was beginning, and in September 1995, Netscape had its initial public offering. For those four quarters, commercial printing was an average of 4.5 percentage points better than GDP growth. Prior to that, commercial printing had lagged GDP during a period of slow economic growth. Since Q2-1996, the difference between nominal, unadjusted GDP and commercial printing has been 5 percentage points. The last two quarters of 2014 commercial printing had positive growth compared to the prior year, but still lagged GDP by -1.6 percentage points.
Published: February 26, 2015
The Fed stopped Quantitative Easing a while ago, and the value of its balance sheet fluctuates around the $4 trillion level. As their holdings mature, their aggressive position in the bond market will slowly unwind. Or will it? The Fed is likely to decide to re-invest proceeds in more bonds and obligations, replacing the matured debt with new ones, but not adding to their overall position unless there is a crisis again. Until their first moves where they doubled their balance sheet quickly, from $800 billion to $1.6 trillion, this measure of the money supply moved steadily at about a 6% annual rate, sometimes a little more, sometimes a little less, about half equal to economic growth and the other half to inflation. Whether or not the Fed will reduce its balance sheet or not is still a question in my mind. They could just hold steady, and let inflation and growth catch up to them, which will take quite some time, but not scare the markets. But something always happens that's not according to plan, and the Fed will be interesting to watch as they move from this unchartered territory to another.