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PIA Adjusts Economic/Print Forecasts in Response to September 11 Attacks

Press release from the issuing company

ALEXANDRIA, VIRGINIA (October 10, 2001) – The Printing Industries of America (PIA), Incorporated, surveyed a cross section of its members soon after the September 11 tragedies in New York City, metropolitan Washington, D.C., and western Pennsylvania, and adjusted its economic and print market forecasts for the last two quarters of 2001 and 2002, accordingly. Based on results of the survey jointly conducted by PIA’s Economic Research and Government Affairs departments and newly released economic data, PIA Chief Economist Dr. Ron Davis surmised the U.S. economy will be in recession during the third and fourth quarters of 2001, but will be in recovery in early 2002. Print sales will decline for 2001, but are expected to recover and experience growth in 2002. In dollar terms, the overall impact on the financial position of the U.S. printing industry as a result of the attacks September 11 are extremely significant. The difference between expected industry sales and profits for 2001 and 2002 before and after September 11 is an anticipated loss of approximately $6 billion in sales and $1.5 billion in profits. The survey, conducted September 20-24, involved 310 respondents. Davis’ complete findings are detailed below in September 11 Aftermath: What are the Consequences for the Economy and Print Markets: September 11 Aftermath: What are the Consequences for the Economy and Print Markets The Economy: Before September 11, 2002 it looked to most observers that the U.S. economy, while in a slowdown, would not tip into its first recession since 1990-1991. The economic shock from the attacks will likely tip the fragile economy into recession for the third and fourth quarters with total economic output declining by around .5 percent in the third quarter and .5 to 1 percent in the fourth quarter on an annual basis. For the year, the economy should decline by around 1.5 percent in real terms, or by $150 billion in output. This compares with a previously expected gain of around 1.5 percent before September 11, resulting in some $300 billion in lost economic output in addition to the estimated $20 billion in destroyed wealth on account of this terrorist attack. Print Markets: Print markets took a drastic hit the first two weeks after the attacks as normal economic activity was set aside. According to the PIA survey, printers’ sales were down an average of 17 percent compared to what would have likely taken place for the month of September, amounting to perhaps a $2 billion loss in print sales. More than four out of 10 printers saw their sales plummet in excess of 20 percent. A little more than 75 percent of printers characterized the impact on current market conditions as either a "severe negative" or "moderate negative." A majority of printers believe that it will take six months to a year for print markets to stabilize. Overall, printers' sales will probably be down around 1 percent on a year-to-date basis for the third quarter and 1-1.5 percent for all 2001 against their 2000 levels. This decline is a start contract to the expectation before September 11 that there would be a gain of 1 percent in 2001 print markets. In terms of total 2001 print sales, the attack is projected to cost printers around $3.3 billion in lost sales or about 2 percent of annual sales. Revised Economic and Print Market Outlook for 2002 The economy has suffered a severe shock but recovery should begin in the first half of 2002. The current updated consensus outlook is for the economy to rebound to positive growth in the first quarter of 2002 and get back to an annual growth rate of 3 percent by the second quarter. Overall, the 2002 economy should grow by about 2.5 percent, down slightly from previous forecasts of a 3 percent growth rate. This forecast is predicated on no additional significant terrorist acts, which could further damage consumer confidence. As the economy achieves growth rates closer to the longer run trend, print markets should also gain momentum. Previous expectations were for total print sales to grow around 3 percent in 2002 to about $167 billion. Three new factors will keep print markets from growing at this rate in 2002: First, the recession in late 2001 has reduced the base level of 2001 printers' revenues. Second, the decline in the growth of overall economic activity will cost print markets about a half point of growth in 2002. Thirdly, advertising expenditures are expected to recover slower than the overall economy. Observers believe the downward push will be on those print markets driven by advertising; direct marketing, magazines, catalogs and some general commercial activity. As a result of these two factors, print markets are projected to grow by only around 2 percent in 2002, or to around $166 billion, which is just slightly ahead of their 2000 level. Printers' revenues from specific print market segments will reflect the gradual recovery of the economy and tight advertising budgets in 2002. Even those markets hardest hit by tight advertising budgets should still show some growth in printers’ revenue and reflect the recovering economy. General commercial and quick printing revenues should grow at rates slightly less than the overall economy. Book, packaging, labels, and wrapper printing revenues should grow at rates close to the overall economy. Directory printing and business forms will continue as laggards as electronic substitution pulls away business.