Packaging Printers Continue to Outperform Other Segments According to Business Indicators Research

To help printing companies navigate through the current crisis to the recovery on the other side, NAPCO Research and the PRINTING United Alliance have launched COVID-19 Print Business Indicators Research. This is the second in a series of reports that examine the effects of the COVID-19 crisis on the printing industry, how printers are responding to the crisis, and how they can create a path forward. This survey tracks key indicators across a cross section of printing companies, including commercial printers, graphic and sign producers, apparel decorators, functional printers, and package printers/converters. Click here to download an Executive Summary of the report.

This article focuses on key findings from packaging printers/converters participating in the second survey. Our third survey is now in the field and open for any commercial printers to participate. Please CLICK HERE to take the 3-5 minute survey.

Average Change in Sales Near Zero in the Last Month

Package printers/converters have been the most fortunate of any print segment thus far as the demand for essential goods such as groceries, pharmaceuticals, and other healthcare related products have increased. The contraction within the packaging/converting segment has been the least severe over the past 30 days, as sales fell by an average of 1.4%. While negative sales growth is never good, this number is up from -15.3% in mid-April which means that the worst may be behind. On another positive note, a greater portion of respondents indicated that sales increased over the last 30 days (45.5%) compared to April (31.3%), and just over a quarter (27.3%) said that their sales have fallen in the current period. Figure 1 shows these figures from the first and second COVID-19 Business Indicator reports.

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Index Reports Business Activity Is Increasing

The research tracks current and leading business indicators. For the current period, the index of current business indicators (including sales, production, employment, prices, and pre-tax profitability) for packaging printers/converters closed at 54.8. A reading above 50.0 means more printers report activity is rising than report activity is falling. This follows a reading of 45.2 for the previous iteration of this report and is the first time any segment has been above 50 since this research has begun.

The index of leading business indicators (including work-on-hand, quote activity, production payroll hours, and confidence) closed at 56.9 in early June showing that the segment is no longer falling like it was in April with an index reading of 44.8. Once again, a reading above 50.0 means more printers report these forward-looking measures of activity are rising than report they are falling. This measure is used to identify the first signs of recovery and how recovery is likely to progress.

According to these numbers, we can assume that packaging printers/converters have already hit their lowest point and are now on the road towards recovery and growth.

COVID-19 Drives Demand for Some Businesses

Some of the firms in this segment were fortunate enough to work with clients who create products that increased in demand during the pandemic. One respondent said, “COVID has caused panic purchasing, everything has increased.”

“We produce items that have dramatically increased in volume due to COVID-19,” mentioned another who had similar fortune.

As consumer behavior returns to pre-shutdown levels, some of these firms will have to temper expectations for COVID-related sales, but in most cases, they will make up for this as their usual clients return to business.

PPP Coupled with Reopening Keeps Employment Steady

The Paycheck Protection Program has helped businesses across all industries retain employees during these difficult times. Although the program got off to a rocky start, improvements have been made and companies have been able to utilize these funds. While the segment did indicate some employment growth (16.1%), the majority of respondents said that they were holding employment steady: 64.5% said that employment numbers were staying the same, up from 44.8% two months ago, while 19.4% report employment is declining, down from 34.5% in early spring. 54.8% of package printers/converters applied for the PPP loan, which surely aided these companies in terms of keeping employees on the payroll.

The deadline for PPP applications has been extended through August 8 and businesses now have 24 weeks to spend the funds. The portion of the loan that must be spent on payroll has dropped from 75% to 60%. If this loan can help your firm survive this difficult time, reach out to your bank and they can assist in securing the loan.

Nearly 75% of Firms Anticipate Business to Grow or Remain Steady Over the Next Month

When asked about the next month ahead, 35.5% of firms indicated that they anticipate their business to improve. This more than doubles the number who said the same thing in April (17.2%). A similar percentage of firms (38.7%) expect conditions to remain the same. This is not necessarily a bad thing as many firms in this segment have been able to continue operations throughout COVID, so more of the same will definitely keep them afloat. Figure 2 shows business expectations for packaging printers/converters over the next month.

The optimism seen stems from the fact that many respondents are beginning to actually see an uptick in activity after the reopening as one printer stated, “Amount of activity in the last few weeks is picking up.”

Others reiterated this sentiment but made sure to mention that they are still not where they want to be, “Work has picked up, but not steady yet.”

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A Path Towards Economic Recovery

Over the last month, we have seen the economy begin its reopening process. With the nature of the virus, different geographies and industries have opened at different paces. Because of commercial print’s wide-reach, segment recovery will happen in spurts that echo the reopening of clients’ industries. Obviously, this means that some printers will recapture business quicker than others.

In terms of general U.S. economic health, things are beginning to trend upward from the lowest points. Consumer spending, the anchor of the U.S. economy, jumped a record 17.7% in May due to pent-up demand. Key employment metrics improved as initial jobless claims have tapered off significantly and continue to hover below 1.5 million. The May unemployment rate of 13.3% was much lower than expected and improved to 11.1% in June.

Of course, this good news must be taken cautiously. A rise in cases in some places has resulted in pauses of the reopening process as well as reclosures. Though the death count from the virus is slowing, decision makers are still being careful to ensure the safety of their citizens. It is integral to keep an eye on cases in your area and adhere to health and safety recommendations so that business can return as quickly as possible.

Participate in the COVID-19 Print Business Indicators Research

In today’s unprecedented business environment, making decisions based on facts has never been more important. In the weeks and months ahead, reliable industry business indicators will be essential for monitoring what’s happening in all printing industry segments. The COVID-19 Print Business Indicators Research is an essential resource for monitoring industry conditions and the NAPCO and PRINTING United Alliance research teams invite you to join our business panel and contribute to the research on an ongoing basis. Companies that join the panel will receive an exclusive version of the report that includes additional data and analysis. To join the Covid-19 research panel, please click here.

ABOUT NAPCO RESEARCH

The combined NAPCO and PRINTING United Alliance research teams develop research and economic models that solve customer business problems. 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 organizations needs contact NAPCO’s Vice President of Research, Nathan Safran, at nsafran@napco.com.