Association Chief Economist Andrew Paparozzi reports sales growth faltered in the first quarter, but believes 2015 will see 2.5%-3.5% annual growth 

Alexandria, Va. - “Business has slowed significantly across our industry,” notes Epicomm Senior Vice President and Chief Economist Andrew Paparozzi in the Spring 2015 State of the Industry Update, provided quarterly to members of Epicomm, the Association for Leaders in Print, Mail, Fulfillment, and Marketing Services. But, he adds: “The majority of companies we survey believe the slowdown is temporary. And so do we.”

In the four-page Update, part of the State of the Industry Series sponsored by Canon, he points out that industry sales grew 3.4% from fall 2013 through summer 2014 without interruption?the industry’s strongest growth since 2007. During the same period, employment rose 0.5%, the first increase since 1998. 

But sales growth slowed to 0.2% during the last quarter of 2014 and increased just 0.7% in the first quarter of this year, while employment fell 0.8%. The reasons, writes Paparozzi, are twofold: “the severe winter of 2014-15 and an abrupt slowing of the economy. The first is finally behind us. The second is the question mark.”

Nonetheless, for a variety of reasons outlined in the Update, Paparozzi expects the economy to pick up during the second half of 2015, “with GDP at least matching last year’s 2.4% advance and maybe even hitting 3.0% for the first time in a decade.”

His optimism appears to be shared by the State of the Industry Survey participants whose confidence has not been materially affected by the disappointing start to 2015: 32% now expect business to improve over the six months ahead, only fractionally lower than 32.3% last August, while just 4.7% expect business to decline, down from 6.8% last summer.

“We still expect total industry sales from all sources, not just printing, to grow 2.5% to 3.5% this year, after rising 2.4% last year,” says Paparozzi. “A stronger first quarter would have increased the likelihood of finishing in the upper half of that range; now the odds favor a finish in the lower half.

“Either way, we will have our best back-to-back years in a long time.” Nonetheless, he cautions, “We will not, however, grow fast enough to meaningfully ease the pressure on prices and profits. Just 38.2% of the companies we survey report prices are higher and just 34.8% report profitability is higher than it was last spring.”

On the employment front, 40.3% expect to increase employment over the next six months, up from 33.6% at this time last year, while just 4.7% plan to reduce employment, down from 12.7% one year ago. At the same time, more than one-third (37%) of survey respondents report they are under pressure to raise wages and salaries and nearly 16% report challenges such as increased employee turnover, greater difficulty recruiting and retaining experienced personnel, and greater difficulty recruiting and retaining entry-level personnel.

The Spring 2015 State of the Industry Update also includes a discussion of key actions companies are taking to improve performance and profitability, including a list of the 25+ top steps companies are taking to ensure that their 2015 results are better than those of 2014, ranging from being more environmentally friendly/more sustainable (4.6%) and revamping their sales compensation program (6.1%) to controlling costs/doing more with less/reducing spoilage, rework, and waste (61.7%) and trying new approaches to marketing (67.9%).

The State of the Industry Update newsletter, issued three times a year, and annual State of the Industry Report are provided as a member benefit to all Epicomm Level II and Level II+ members, as well as all associate and educational members.

For information on Epicomm economic and trends reports, contact Andrew Paparozzi at (201) 523-6353 or [email protected]. For information on Epicomm membership and member benefits, contact Donna Komlo at 201-523-6345 or [email protected].