Printers predict selling prices will rise this year

15 February 2007

This seemingly contradictory finding is reported in Printing Industries recently released December 2006 quarter report for the Printing Industry Trends Survey, which was completed by companies in 16 sectors, including the newly introduced digital sector.

According to Hagop Tchamkertenian, Printing Industries national policy and research manager, the industry optimism of last quarter was reflected in the strong trading outcomes reported during the December quarter. Key economic indicators such as orders, production, sales and net profits were all reported to have improved during the December 2006 quarter.

Despite this welcome improvement he said that he was concerned to see that actual outcomes were once again consistently below expectations across a number of key indicators.

Other important December 2006 quarter developments reported by the survey respondents include:

  • Increased employment and overtime levels
  • Increased investment in plant and machinery and buildings during the past six months
  • Finance reported more easier to obtain
  • Labour availability was reported to have deteriorated once again for the tenth consecutive quarter
  • Increases reported across all production cost categories
  • Selling prices reported to have fallen for the 24th consecutive quarter
  • Reduced levels of raw material stocks and
  • Increased numbers of outstanding debtors.

    On the issue of capacity utilisation rates, the December 2006 quarter results show that 72.1 per cent of respondents were operating at capacity levels of 70.0 per cent or over, up from the 64.0 per cent proportion reported last quarter and the 66.9 per cent proportion reported this time last year.

    The December 2006 quarter revealed that 80.3 per cent of survey respondents ranked lack of orders as the primary barrier to increasing production levels, an outcome that is lower than the 90.4 per cent proportion reported during the September 2006 quarter, and marginally lower than the 81.8 per cent proportion reported during December quarter 2005.

    Gazing ahead to the March 2007 quarter the following results are expected:
  • Net balance increases in orders, production, sales and net profits
  • Recovery in selling prices
  • Increased availability of finance
  • Reduced availability of labour
  • Reduced employment and overtime levels
  • Further increases in all production cost categories - average wages, other
    labour costs, and average material costs
  • Reduced stock levels and
  • Increased number of outstanding debtors.

    Over the next six months (March and June 2007 quarters) the survey respondents are forecasting:

  • Increased investment activity in plant and machinery and
  • Reduced investment activity in buildings.

    With the exception of respondents from Tasmania the outlook for general business expectations over the next six months remains favourable in the states. The most optimistic state is Queensland followed by Western Australia.

    Respondents from Queensland reported the highest capacity utilisation rates during the quarter followed by respondents from Victoria. Idle capacity remains a problem for respondents from South Australia, New South Wales and Western Australia.

    High capacity utilisation/activity rates were achieved by the Desktop Publishing/Graphic Design, Quick Printing, Other Packaging and Paper Converting, Cheques and Securities, General Promotional and Commercial and Folding Cartons sectors.

    Considerable levels of excess capacity seem to exist in the Business Forms and Continuous Stationery, Graphic Reproduction, Screen Printing, Book Binding, Books, Magazines, Periodicals and Newspapers, Greeting Cards, Calendars and Diaries, and Digital Printing sectors.

    With the exceptions of the Graphic Reproduction and Other Packaging and Paper Converting sectors (deterioration forecast) most product sectors are expecting either improvements or no change to take place in general business conditions over the next six months.

    Most sectors are either forecasting increased investment or no change in plant and machinery over the next six months, while the Greeting Cards, Calendars and Diaries, Screen Printing and Folding Cartons sectors are forecasting reduced investment activity.

    A close examination of the latest survey outcome clearly shows the presence of seasonal influences, said Hagop Tchamkertenian. A number of emerging trends are also noticeable such as skilled labour availability continuing to remain a problem for companies operating in the printing industry and industry expectations point to the continuation of the problem. Wage costs seem to be trending up and selling prices continue to fall despite expectations to the contrary.

    The improvements to cash flow seem to have been confined to just one quarter with the December quarter data once again showing actual outcomes surpassing expected outcomes.

    One notable forecast from the March 2007 quarter concerns selling prices. Despite 24 consecutive quarters of reported falls, survey respondents continue to remain confident that selling prices will recover during the March 2007 quarter. The forecast for selling prices is the most optimistic forecast since December quarter 2004.

    Any one interested in obtaining a copy of the full survey report can contact Printing IndustriesPrintNet