Editor’s Note: What is really happening with the economy? Its hard to know what is really happening with so many indicators, revised numbers and predictions. Indeed, even at this site, we have a whole department (Indicators) dedicated to tracking key indices that print and publishing executives watch: Ad numbers, industry employment, consumer confidence, manufacturing growth and our own Print Buyer Pulse and Printer Confidence Indexes. For the most part, industry indexes have been mixed. But what does this all mean to print executives? How do national indexes relate to our industry? And why is keeping track of economic data important? In a special report for our members, Ms. Susan Kelly of Raine Consulting takes a look at several overall performance measurements in today’s economy. Ms. Kelly provides the bottom line for printers who want success in this economy. Most importantly, she gives guidance for the industry as a whole... because “knowing” your operating environment is the difference between success and failure. Economic Outlook for the Printing Industry: Getting Clarity By Susan Kelly, Raine Consulting Inc. The headlines in the Wall Street Journal on August 1st, 2002 revealed new data that painted a darker picture of the economy. The economic output grew at 1.1% annual rate in the second quarter, down sharply from the 5% rate in the first quarter. Even more alarming is that the U.S. Commerce Department also made extensive revisions to data from previous years indicating that last year’s recessions was longer and deeper. The revised data shows the economy shrinking in each of the first three-quarters instead of just the third, as originally thought. Yet, just the day before I attended an Economic Briefing by one of the largest U.S. Banks. The message I heard quite clearly was that the economy was steadily improving and that the Dow Jones Stock Market is out of step with the economy. From these conflicting data points, it is clear that we all need some deeper analysis to get better clarity of what’s really going on. It should be noted that I am a voracious reader of economic theories and reports and also minored in Economics for my MBA degree, but in no way am I an economist by trade. Like any typical business person, I try to make sense out of so many credible economic indicators today. The trick is to figure out what they are really telling us about our business. Better yet, any insight into the timing of impactful trends is a bonus. I am an "arm chair" economist; one who needs information and answers to burning questions like: "How do I plan and operate my business profitably in today’s business environment?" Near as I can figure, the news for the future is not good despite the encouraging PowerPoint presentation I received at the bank briefing. Even the Wall Street Journal on Monday July 29th had three completely different views of the economic outlook on the front page of their Money & Investing section. Seeing this kind of polarity by very smart people scares me. It’s a sign that everyone is using different information to make different conclusions. Consider the following: Lets take an average of several outlooks versus just one: Of the twelve different indicators, 58% are negative, 17% positive, and 25% neutral. Raine’s conclusion: there’s a high probability that the economy and the stock market will continue to move sideways for a least another 12 months and that the recovery will be so slow that we won’t even feel the difference. There will be definite winners and losers, however the average performance for average companies will be lackluster at best. This is not good news to the printing industry. The TrendWatch Printing Survey from Spring 2002, showed economic conditions at the top of the list of printer business challenges. Recent monthly Printer and Print Buyer indexes posted at WhatTheyThink.com also indicate a sluggish and slipping outlook from the two groups. Raine believes the industry will continue to see poor growth performance for at least another 12 months, if not longer. Why? The printing industry has been performing slightly below average as compared to other industries in many of the U.S. Commerce Department economic indicators (i.e., Industrial Production Index, Capacity Utilization Rates, etc.). The double whammy is that printing is an industry in flux as content management collides with production technologies. The next burning question is: "Am I prepared to accept the economic realities for the printing industry and have the strength to decide the right survival options before the options choose me?” Finding Answers I am eternal optimist and believe a new exit door can be built using technology....to reduce costs everywhere, improve productivity growth, develop new service offerings, increase knowledge capital, and boost ROI. While the printing industry may be economically below average, there is tremendous running room available today to take cost out of the workflow and reinvent print products. Getting opportunistic about how to implement well-actioned, affordable, and customer-driven systems to restructure the business is paramount. The textile industry is going through fundamental industry restructuring now. This is a pattern to soon be repeated by the printing industry however one, we believe, that has greater growth possibilities. What’s clear is that the economy is not going to assist the printing industry with growth options; quite the contrary. Everything from generating sales to cutting costs will feel like wading through mud in the fog. Any positive gains in a U.S. printing company in the next couple of years will be made solely on the true entrepreneurial spirit from which it was born generations ago.