No Surprises from The Fed!

To no one's surprise, The Fed left interest rates alone this week. Seemed that they realized with uncertainty like Iraq hanging over the market, any Fed easing wouldn't work anyway. Had they eased, some would have construed it as panicking about the shape of the economy.

U. S. Department of Commerce GDP 4th Quarter 2002 Stats

GDP grew at a rate of 0.7% in the fourth quarter, and only 2.4% for the year. We seem to be in an alternating good quarter/slow quarter pattern. At least it's not declining, but it's clear we're not growing at the rate necessary to build greater investment confidence. The Commerce Department did not release corporate profits data in this advance GDP release, and that will be critical in assessing when the print business might pick up. In the meantime, the NASDAQ is a good surrogate, and that has been nothing to write home about. Once optimism about sustainable growing corporate profitability takes hold, we'll see the increased spending on promotions and advertising that is so important in driving the print business, but that will take some time.

The employment cost index was up, with private industry wages and salaries up 2.7%, and benefits costs up 4.7% for 2002, the latter due principally caused to health care costs. Look for companies to start telling employees how much their "free" health care actually costs, raising employee contributions to those costs. Increasing total benefits, however, is a sign that tax avoidance is again becoming a goal of many compensation packages. How soon we forget that vacations and health benefits were added half-a-century or more ago partly as a means of avoiding wage and price controls. (More barely useful trivia from Dr. Joe).

Jobless claims were up, but the four-week moving average of the index was down. Look for continued unspectacular movement in unemployment. I still remind everyone that back in the late 70s and early 80s economists considered 6% to be full employment. How soon we forget (do I have to remember everything around here?) -- the real target for full employment number is 3-4% unemployment rate. Whatever the case, a jobless recovery is no recovery at all.

In Other Economic News . . .

The U.S. Department of Commerce reported this week that durable goods orders were up, but not as much as was expected. Buried in the report is good news, though -- a 2.8% increase in orders for computer products and a similar increase in non-defense capital spending.

Consumer confidence as reported by the Conference Board on January 28th dropped to its lowest level since November 1993, but home sales were up. Consumer spending is still strong, despite the confidence index dropping in 7 of the last 8 months.

Perhaps business investment is starting to pick up? While it’s not enough yet, at least we're moving sideways and not down.

More on the PIA Projections for Tax Cut Impact
(See the original DJW Quick Take)

On January 24th, the PIA released its assessment of the effect of the President’s proposed tax plan on the printing business, indicating 2004 would be the best of the next three years, with sales growth for 2004 of 3.8%, up 0.6% from previous estimates.

As I said in my Quick Take earlier this week, I believe this assessment is too rosy. To bolster its forecast, PIA cited the fact that 2004 is both a political and an Olympic year. While this may have been the case a while ago, the most recent year these events aligned was 2000, not a particularly good year for the print business. In 1992, it was the "it's the economy stupid" campaign, and the incredibly high growth of the fourth quarter of 1992 was way too late to help Bush41. 1996 was a pretty good year mainly because Congress controlled spending growth (mostly because of gridlock, rather than specific intent it seemed) and there was an increase in productivity as computer networking and Internet technologies started to storm through the economy. IT spending also started to rise as managers worked to avoid Y2K problems – and IT spending is critical to B2B printing. Its absence today is significant.

So the fact that it is a political and Olympic year are positives, but they exist within the context of a total environment of technology, regulation, and social factors which I believe will have far stronger impact. Having read accounts of the role of e-mail in these last elections, one can only think that e-marketing will play yet a bigger role in both political and Olympic promotions in the future.

Cross Media is Dead (AOL/T-W Strikes Again)

After posting an incredible quarterly loss from more write-downs at AOL, Ted Turner says he wants CNN and the Atlanta Braves back. AOL could use the cash. Don't be surprised if they take the offer (sources say “Braves yes, CNN no” so far). Turner honestly loves both properties and probably doesn't want AOL/T-W to do to the Braves what they have been doing to CNN. The Braves are one of the best-managed businesses -- not just sports teams -- in the U.S. We're rooting for Ted. But we still love the Mets (don't ask; it's a misplaced loyalty thing).

Beware the E-Magazine

Some of you know about my misadventures with Zinio, the electronic magazine service used by Ziff-Davis that has been such an administrative headache for me. My problems seem to have passed, for now at least, and I strongly recommend that anyone involved in the print business take a good hard look at this technology. Visit http://www.zinio.com to download the free Zinio reader and some free magazines, including prototypes of Harvard Business Review and PC Magazine.

Any attack on print magazines -- a critical part of the heatset web and gravure businesses and the segment that makes big printers big -- must be taken seriously.

Watch for my WhatTheyThink Special Report on E-Magazines this coming Tuesday! I’ll report on the future of e-magazines and where the concept might fit best. And I’ll have some comments on what it’s like to use Zinio.