Print conditions deteriorate but better than last year – Hagop Tchamkertenian’s report

Printing pretax profits jump 28 per cent from last year even though industry figures in September are below the previous quarter.

According to the September 2007 quarter national accounts, released by the Australian Bureau of Statistics (ABS), the printing, publishing and recorded media industry declined by almost 3.0 per cent during the quarter on trend basis to register a modest annual growth rate of 2.1 per cent.

Compared to other sectors of the Australian economy the printing sector was not a star economic performer during the September quarter. And with the ABS updating the reference year, the June 2007 quarter which had previously shown growth has now been revised to show a decline. This means that technically, the industry is once again in a recession.

The national accounts data is the last in a series of major economic data released on the industry during the past week. On Monday sales and profit data were released and last Thursday new capital expenditure figures were released. The sales data shows that despite a 2.0 per cent decline on the June 2007 quarter figures, the September 2007 quarter outcome represented an improvement of 11.6 per cent compared to the same period a year earlier. Total sales for the year to September totalled $19.4 billion, an improvement of 10 per cent on the same period a year earlier.

Pre-tax profits in the printing, publishing and recorded media sector were reported to have fallen by 8.7 per cent during the September 2007 quarter compared to the June 2007 quarter. But despite the reported deterioration, pre-tax profits are up by 28.0 per cent when compared to the same period a year earlier.
Total pre-tax profits for the year to September totalled more than $2.6 billion representing an improvement of 39.6 per cent on the outcome achieved during the same period a year earlier.

Big printing companies are doing well
With the ABS only accepting data from companies employing 20 or more employees for its profit data, the larger players in the printing industry which comprise about 15 per cent of the total industry when measured by number of establishments seem to be doing reasonably well.

The final set of economic data released in recent times was new capital expenditure which was reported to have increased by 1.9 per cent during the September quarter when compared to the outcome of the June quarter. But despite the improvement, the September 2007 quarter outcome represented 6.0 per cent deterioration on the September 2006 outcome.

New capital expenditure for the year to September totalled $613.0 million representing a 19.6 per cent deterioration compared to the same period a year earlier. According to expectations, there are plans for $417.0 million of new investments over the next 9 months.

Today's national accounts figures show that over the September quarter the Australian economy grew by 0.9 per cent on a trend basis resulting in an annual growth rate of 4.0 per cent. The principal drivers of economic activity during the quarter were household consumption expenditure and government expenditure. Net exports once again detracted from growth.

Payment to employees increased by 1.6 per cent during the quarter and by 9.0 per cent during the year to September in seasonally adjusted terms. Private sector gross operating surplus fell by 0.6 per cent during the quarter but was up by 10.0 per cent during the year to September.

The wages share of the economy rose from 53.9 per cent to 54.2 per cent while the profit share fell from 27.0 per cent to 26.6 per cent.
Trend based growth rates among the states and territories show Western Australia grew by 11.2 per cent during the year to September followed by Queensland which grew by 7.9 per cent, Tasmania 4.6 per cent, New South Wales 4.5 per cent, Victoria 3.3 per cent, Australian Capital Territory 2.3 per cent, South Australia 2.0 per cent and Northern Territory 0.2 per cent.

At a broad industry level retail trade, transport and storage, finance and insurance, property and business services and ownership of dwellings were all reported to have contributed to growth while mining detracted from growth.

What it means for the Printing industry
Providing an overall assessment of reported economic conditions in the printing industry, Printing Industries National Policy and Research Manager, Hagop Tchamkertenian, said the latest data shows that industry conditions are softening.
"Putting it in proper context while the printing industry is no longer expanding due to reported deterioration in industry sales, pre-tax profits and economic growth during the September quarter, when compared to the same period a year earlier the reported outcomes still remain favourable," he said.

"The September 2007 quarter shows the Australian economy continues to grow in a robust manner an outcome that is likely to exert upward pressure on interest rates.
Mr Tchamkertenian said with the Reserve Bank of Australia remaining concerned about increasing underlying inflationary pressures, it is now likely that measures will be taken to slow down domestic economic activity.

"If interest rates rise as expected over the next six to nine months, then at both the Australian economy level and certainly at the printing industry level economic conditions will become significantly less buoyant.
"The key to whether there will be further sustained economic growth or a possible economic bust now rests with the forthcoming monetary policy decisions of the Reserve Bank of Australia," he said.