The latest main economic indicators released by the Australian Bureau of Statistics (ABS) confirms that the printing industry is once again growing following registration of positive rates of economic growth as measured by gross value industry added in recent quarters. There are also positive developments in the area of industry sales but the trends in new industry capital expenditure confirm a softening.
The ABS regularly updates publicly released economic data in subsequent quarters based on the release and collection of more reliable information and this seems to have caused some noticeable changes to the indicator that measures economic growth in the printing industry. A review of the latest main economic indicators for the printing industry will be outlined in this column along with an assessment of what they mean for printing industry participants.
Print rebounds
Based on the updated ABS data the printing industry is shown as recording three consecutive quarters of economic growth which contrasts to the reported five consecutive quarters of economic decline prior to the data update. Especially significant have been the changes for the past two quarters with noticeable upward changes applied to the industry’s gross value added measure as shown by the following chart.
During the past two quarters the printing industry’s gross value added has been adjusted upward by $48m. The 4.95 per cent upward adjustment made to the previous quarter when translated to an Australian economy equivalent terms would constitute almost a $21bn change which highlights the significance of the upward revisions that have recently been made to the printing industry gross value added measure.
The printing industry registered a solid 2.8 per cent economic growth during the June 2016 quarter, the strongest economic growth outcome for some 15 quarters and on the heels of another impressive 2.7 per cent growth in the March quarter. At $784m the reported printing industry gross value outcome in June was 3.8 per cent higher than the corresponding period a year ago. During the past four quarters the printing industry has generated an industry gross value added of $3,025m which compares to a reported outcome of $3,087m for the year to June 2015. So despite the recent welcome improvement driven by significant upward data revisions the full year outcome for economic growth still shows 2.0 per cent deterioration.
A historical review of the economic growth chart over the past decade confirms that up until the September 2015 quarter the impact of these revisions to the economic growth data have tended to be largely statistically and hence economically insignificant but during the past three quarters the situation has dramatically changed and the revisions and updates have fundamentally changed the economic growth fundamentals of the printing industry to the extent that the industry has been transformed from a contracting industry to one that is once again expanding and registering positive rates of economic growth.
Print sales also recovering
Sales have started to increase in the printing industry after a period characterised by a declining trend. Not only have sales now been positive for the past two consecutive quarters but encouragingly the June quarter reported sales percentage change outcome is also the strongest reported outcome since December quarter 2012.
The accompanying sales chart also confirms the volatile nature of printing industry sales which totalled $7,243m during the past 12 months. Compared to the same period a year earlier when printing industry sales stood at $7,523m, the latest sales data confirms industry sales have deteriorated by 3.7 per cent. The $280m deterioration in industry sales over the past 12 months would have been sufficient to support the equivalent of more than 1,300 full time industry positions.
Capex deteriorates
The improving industry economic numbers did not flow on to new capital expenditure with the data showing that new capital expenditure in the printing industry fell for the second consecutive quarter effectively bringing to an end a solid 2015 calendar year that saw new capital expenditure surge in the industry from $33m during the March 2015 quarter to $88m in the December 2015 quarter, the best quarterly reported outcome since March quarter 2010. During the year to June 2016 total new capital expenditure in printing stood at $309m representing a 94.3 per cent improvement, or virtual doubling, on the $159m figure registered for the same period a year earlier.
One is able to get a better appreciation of the trend in new capital expenditure for the printing industry when the data is also presented in dollar terms. As is evident from the following chart while new capital expenditure improved over the 2015 calendar year the peak reported performance in the December 2015 quarter was significantly below past peaks of December quarter 2009 and December quarter 2007. It seems new capital expenditure in the printing industry is now facing a structural downward trend which will see periods of recovery but the overall magnitude of the improvement will not be as significant as past results.
What does it all mean?
The latest data from the ABS covering the main economic indicators once again confirms the economic resilience of the printing industry in the face of ongoing socio-economic, structural and technological changes. While from a historical perspective any long term analysis does confirm a downward trend across all major industry economic indicators, the industry is definitely not on a constant downward trend as feared by some but instead it has shown that it has the capability of arresting economic decline by staging periodic economic rebounds that persist for several consecutive quarters.
Given the consolidating nature of the industry these periods of economic recovery are of welcome development as they allow industry participants to respond both commercially and more importantly strategically to the evolving economic landscape. There is no doubt that my prediction of a printing industry that is evolving into a boutique and niche-based industry is coming true and this will be the natural outcome for the bulk of industry participants whose main focus remains printed matter communications.
For other participants who have embraced other mediums as part of their service offerings and who successfully co-exist and operate in the much broader communications industry eco-system they will be less constraint by growth opportunities than their more traditional printing sector focused peers.
While data updates have significantly impacted the printing industry gross value added measure in recent quarters one hopes that the upward revisions are fundamentally based on sound statistical practice such as collection of more reliable data instead of a misrepresentation of actual industry trends.
Conclusion
Tentative signs point to a rebound of economic activity in the printing industry with both sales and economic growth data once again demonstrating the economic resilience of the industry. Given these emerging positive trends the outcome of the next two quarters will now be critical as both sales and gross value added measures have a tendency to be volatile. New capital expenditure trends show the emergence of a downward trend after a solid period of expansion during calendar year 2015.
A weakening new capital expenditure may also imply that used plant and machinery is being substituted for new capital expenditure items, the by-product of ongoing industry rationalisation and consolidation efforts. Since new capital expenditure always portrays a partial representation of overall industry capital expenditure developments, we need to maintain our focus on sales, gross value added, as well as other industry measures such as number of operating establishments and total industry employment to determine and assess the overall economic trend and health of the industry.
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