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Economic and Print Market Trends and Outlooks

Economic and Print Market Trends and Outlooks. Ronnie H. Davis, Ph.D. Chief Economist PIA/GATF. Print Market Trends and Outlooks. A Look Back--The Print Rebound and Current Market Dynamics The Re-structuring of the Industry Outlook for 2005 and 2006 Profit Picture

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Economic and Print Market Trends and Outlooks

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  1. Economic and Print Market Trends and Outlooks Ronnie H. Davis, Ph.D. Chief Economist PIA/GATF

  2. Print Market Trends and Outlooks • A Look Back--The Print Rebound and Current Market Dynamics • The Re-structuring of the Industry • Outlook for 2005 and 2006 • Profit Picture • Global Threats and Opportunities • Keys to Success

  3. The Print Rebound of 2004

  4. Print Rebound of 2004 by Market Segment

  5. PIA/GATF’s Print Market Tracking Model • Based on PIA/GATF surveys, the PIA/GATF Atlas model on printing plants by market segment and employee count, Ratios data on shipments per employee, adjustments for “survivor bias”, “size bias” and “member bias”. • The most accurate tracking available--used by the Federal Reserve System

  6. Final Numbers for 2004

  7. Reasons for the Rebound • Strong economic growth (over 4%) • Advertising rebound • Presidential election (a half-point kick) • Stable postage rates

  8. Print’s Restructuring • Over last 4 years a decline of 4,800 plants and around 150,000 employees • In 2001 and 2003 a decline of 2.4% in sales each year • A loss of over 11,000 printing plants since 1994 • Average size plant has increased from around 17 to over 25 employees (50% increase) • Only larger plants are growing in number

  9. Larger Plants Only Ones Growing in Size

  10. Print’s Restructuring • There are still almost 43,000 plants • Over next 10 years projections are for further declines: • Low-a loss of 4,000-5,000 • Middle-loss of 6,000-8,000 • High-a loss of 8,000-10,000+

  11. Print and the Economy • Economy grew over 4% in 2004 and print grew 2.8% (70%) • 2.8% is “real” print--printing prices declined by .2% in 2004 (PIA/GATF estimate for FRS) • Up until mid 90s grew as fast or faster • Still opportunity (3% of $160 billion is almost $5 B) • Some processes/segments growing stronger

  12. US Economic Growth Continues Strong • After a strong 2004 growth of over 4% the US economy is still growing strong. • First Quarter 2005 the US Economy grew by 3.5%. • Inflation is remaining in check at 3%. • Unemployment is on the decline. • Remainder of the year we forecast the economy growing by 3%.

  13. First Quarter Update

  14. Outlook for 2005 • Stronger Growth In: - Direct Mail - Books - Packaging / Labels - Periodicals

  15. Printing Shipments From 2005 to 2003

  16. A Five Year View of Print Markets (2005 – 2010) • Assuming US economic growth of 3-3.5% per year over the next 5 years total printing shipments should grow around 2-3% per year or slightly less than the overall economy. • These are “real” numbers in that the number for the economy and print markets has been adjusted for inflation.

  17. Forecast For Average Annual Growth of Print Sales by Sector

  18. Question Mark for 2006 • Postage Rates are going up • Postage and print relationship: • Over 40% of $print through USPS • Past history shows “price elasticity” of mail at .50 and increasing • PIA/GATF estimates that for every 1% increase in postage there is a .175% decline in print volume

  19. A Postage Increase in 2006 • Much lower than anticipated (PIA/GATF led the postal reform effort) • This could cause around a 1% decline in print volume over a 12 month period • If the economy holds up and grows 3.5% or so in 2006, and if there is a surge of direct mail before the increase: • 2006 printing shipments may edge up around 1.5-2% • 2007 depends on economy and postage rates

  20. Profit Picture • A lagging recovery • In the 90’s --3.5% for all printers and 12% for profit leaders • Recession--dropped to 1% for all and 8% for profit leaders. A slow recovery but should see significant improvement this year

  21. Profit Leaders vs. Profit Challengers

  22. Global Threats and Opportunities • US Printing industry still a “net exporter” • Imports growing faster than exports • Exports around 4%/Imports around 3% • Growth of China printing industry--over $700B in 2003 • Growth of global sourcing--almost 4/10 printers say their customers are looking at global print sources • One in three US printers lost a job to a foreign competitor in 2003

  23. Imports Growing Faster than Exports From 1998 to 2003

  24. Global Threats and Opportunities • Almost half of those that lost a job indicated it was lost to a Chinese printer • China has over 92,000 printing plants and 71,000 copy shops • From 2001-2003 China imported 2,400 sheetfed presses and 540 web presses Bottom-Line: Import share will grow but vast majority of will print will remain domestic

  25. Keys to Success for Printers • Have a well developed strategy • Manufacturing efficiency • Administrative efficiency • Be a Learning Organization • Share the Wealth • Offer more ancillary services

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