Restarting the Economy: What Printing and Packaging Companies Can Expect

The economic lockdown is easing. Businesses are reopening. There’s pent-up demand for all the things we haven’t been able to do or purchase in months. And unprecedented monetary and fiscal stimulus is in place.

That’s generating a lot of talk about a quick and sustained (V-shaped) recovery, beginning as early as this summer. And that’s where the economy would be headed if the current recession, like past recessions, were just about economics. But it isn’t. It’s about biology and the lingering effects of a global pandemic on human behavior. And it’s about the immense difference between lifting restrictions on commerce and restoring the dynamics necessary to get the complex $24 trillion American economy back up to speed. Consider, for example:

• Even after the lockdown is lifted, social distancing will force major industries such as hospitality, travel, entertainment, events, and retail to operate well below capacity. Moreover, some portion of the public will not return to their pre-pandemic behavior until a vaccine is developed. There is no way to tell if it will be an economically insignificant portion.
• Many businesses are not going to reopen; their losses have been too great. And for many that do reopen, margins will be pressured by limits on operating capacity and rising costs, including the cost of keeping facilities safe and sanitary for all on site.
• There will be costly litigation unless Congress passes legislation protecting businesses from frivolous COVID-19 lawsuits.
• There will be flare-ups of the virus because not everyone is going to follow even basic, commonsense health guidelines.

All of these factors will weigh on the economy, increasing the likelihood of a recovery that follows a U shape with an elongated bottom (because the economy needs more to time rebound) rather than a V shape. There will be periodic bounces off the bottom during the second half of 2020, but a sustainable recovery that convinces companies to boost capital investment and consumers to boost spending on nonessentials isn’t likely until 2021.

Big Up Turn Expected

What is likely: The upturn will be big when it comes. The consensus of economist surveyed by The Wall Street Journal expects GDP to grow 5.0% next year. That would be the economy’s most rapid advance in 37 years and more than double the 2.3% average annual gain during last decade. In contrast, GDP is expected to decline 6.6% this year, the steepest since 1946 and more than twice the 2.5% decline in 2009, at the depths of the Great Recession. (See Figure 1.)

Tracking the Recovery of the Printing Industry

NAPCO Research and PRINTING United Alliance will track how this all plays out for the printing industry. Our COVID-19 Print Business Indicators Research includes an index of current business indicators to capture when the recession has hit bottom and an index of leading business indicators to capture when the upturn has arrived. Open-ended questions add context to the metrics and explore critical issues such as how printers are protecting their companies from the crisis. The research covers five segments: commercial printing, graphic and sign production, apparel decoration, functional printing, and package printing/converting.

Results of our first survey — more than 500 printing companies participated — show how deeply the COVID-19 recession has affected the printing industry. Sales fell 53.7%, on average, between mid-March and mid-April for all companies surveyed, by 40.0% or more for 71.7% of companies and by 80.0% or more for 24.9% of companies. Quote activity is trending down for 88.0%, work-on-hand for 85.2%, and pre-tax profitability for 80.8%. While 62.0% expect business to stay at current depressed levels (28.5%) or decline further (33.5%) over the month ahead, just 16.2% expect business to improve. Nearly 22.0% report business is so erratic they don’t know what to expect. (Click here to download the report.)

Print Providers Taking Action

The bright spot is how aggressively many we surveyed are moving to power through to recovery. Actions include using social media to monitor client needs and how those needs are likely to change post-pandemic; expanding e-commerce/distance capabilities in sales, marketing, product demonstration, consultation, etc.; pre-payment price discount programs; and of course, protecting the health of their employees. The prevailing attitude is captured by this comment: “We are working on new selling ideas...Never give up!”

Full results of our first survey are presented in COVID-19 Print Business Indicators Research: A Path Forward. To participate in our second survey and receive a report on the results, click here.

We will regularly expand the scope of COVID-19 Print Business Indicators Research. Visit the NAPCO Media and PRINTING United Alliance websites for updates. Your questions, comments, and suggestions are always welcome. Please share them with me at apaparozzi@sgia.org.

Analyst Insights features research and analyst insights from the NAPCO and PRINTING United Alliance research teams. Market research is valuable for making strategic business decisions, solving challenges, and pursuing opportunities, and the NAPCO Media research teams survey, analyze, and monitor critical trends related to marketing, printing, packaging, non-profit organizations, promotional products, and retailing. To learn more about how the team can leverage its research and industry subject matter experts to support your organization’s needs, contact research@napco.com.