Printer's ink pointing to red ink? Slump in orders called predictor of economic downturn

The Economy

August 16, 1998|By Jay Hancock

HALF a millennium and change after Johannes Gutenberg perfected movable metal type and then veered toward bankruptcy, the printed word suffuses the economy.

No soap gets marketed, no merger done, no lawsuit litigated, no news published, no home sold without the toil of Gutenberg's heirs.

The audiovisual industry and Dell computers have done their maximum to stop the presses.

They have failed.

Literacy lives, and it lives in offset plates and ink, not just electrons and bubble-jet toner.

So it is that commercial printing is still essential in the economic food chain and, like blue crabs in the Chesapeake, is a vital sign of the ecosystem.

This canary may be trying to tell us something.

Printers' backlogs and work in progress have "been deteriorating rather sharply since the first quarter," said Andrew Paparozzi, economist with the National Association of Printers & Lithographers.

"That's an early indicator that the demand for printing has been slowing since spring, and that is a very clear indication that the economy has been slowing," he said. "The reading that we have for July indicated that the slowdown continued into the summer."

There is corroborating evidence of economic languor.

Preliminary estimates are that the U.S. economy grew at an annual rate of only 1.4 percent in the spring, down from a sizzling 5.5 percent in the first quarter. Many economists believe the 1.4 percent will be revised downward.

The Asian crisis is lapping up here, hurting U.S. manufacturers. It's hard to tell how it's hurting them worse -- by bankrupting their overseas customers or by stealing their U.S. ones.

Prices of goods imported from South Korea, Taiwan and other developing Asian countries have plunged by almost 10 percent in the past year, a stunning case of deflation that shows no sign of stopping.

But some analysts are still arguing that the Asian crisis is a minor event for America, that low prices and low interest rates ZTC prompted by Pacific trauma will stimulate our commerce. They see a "soft landing," a temporary slowdown followed by renewed vigor.

Paparozzi isn't so sure.

Not a lot of his members have ever shipped product to Yokohama. Nor do they complain much to the trade authorities that Koreans are dumping cheap wedding invitations on the U.S. market.

The fact that printers are feeling the rope go slack now, Paparozzi said, suggests that Asian pain is spreading beyond firms directly exposed to international trade.

"First it was the companies that do business directly in Asia," he said. "Now it's the companies that do business with the companies that do business in Asia."

Paparozzi has traced his industry's heartbeat over almost two decades, and the results are impressive. Print output has shadowed the national economy like red paint on a Corvette.

The biggest pop in 20 years for printing hours came in 1983 and 1984, when the economy finally sprang from the doldrums created by Paul Volcker, former chairman of the Federal Reserve. The biggest decline was in 1990, as the nation slumped toward the last recession.

Like housing starts, retail sales and other recent macroeconomic data, some printing indicators still look healthy.

"You look at the sales numbers now, and they're very strong," Paparozzi said. "And they would mislead you into thinking that the industry and the economy are not slowing."

But order backlogs, the leading indicator of this bellwether industry, aren't nearly as rosy.

"The people who thought this [Asia] was going to be a one- or two-quarter thing and everything was going to be fine by the end of 1998 are getting fewer and fewer," he said.

"I think it is irresponsible to totally dismiss the idea that there will be a recession in 1999 and 2000."

Pub Date: 8/16/98

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