Build Up in Down Time

Hitting a Moving Target

Both industry economists were again looking at revising their economic and industry sales forecasts heading into December. Davis said a complicating factor for the industry outlook is that printing sales lead the economy when it is in decline and lag in a recovery.

NAPL has been calling for industry sales to come in at around -2 percent in 2008, with the decline continuing through 2009 at somewhere between -1 and -3 percent. Paparozzi now believes sales are more likely to fall into the lower end of that range.

PIA’s approach is to present three scenarios for its yearly outlook. The “most likely” scenario had been calling for two consecutive quarters (Q4 2008-Q1 2009) of negative GDP change, followed by a sluggish recovery resulting in a decline in print shipments of -0.5 to -1 percent. Sales would increase 1.5 percent in the “optimistic” scenario (one negative quarter and a quick recovery) or drop in the range of -4 to -5 percent in the “pessimistic” outlook (three quarters of more significant GDP change). Davis’ latest, slightly more positive, revision was still pending.

One of the factors contributing to the uncertainty is the reality of the global economy. This is not a new development, but the worldwide fallout of the financial crisis provided striking evidence of the depths to which the fortunes of countries have become intertwined.

Another big unknown has been how long repercussions of the mortgage crisis will continue to reverberate through the U.S. economy. The widely cited statistic is that consumer spending accounts for 70 percent of GDP and, in recent years, much of that spending has been enabled by growing household debt—via ballooning credit card balances and mortgage refinancing.

“You have to remember that it took us 10 years to get here. We had an expansion built on easy, cheap credit, and that’s now being corrected,” Paparozzi noted.