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Q3 Economic Outlook Webinar with Dr. Joe Webb
June 18, 2008

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Slides

Adobe Acrobat version of the slides (1.81 MB pdf)

Audio

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Post-Webinar Q&A

Q. Are the trends in Europe similar to North America?

A. Not always. Economically, the European Central Bank is far more concerned about inflation, as the Bank of England also seems to be. There is less concern about unemployment, with many European countries having higher unemployment rates that the U.S. In 2007, unemployment rates in France, Germany, and the U.K. were 8.6%, 8.7%, and 5.4%, respectively.

As far as printing goes, there are proportionately fewer small printers and more of a trend for national newspapers, among other characteristics. Europe's many cultures, languages, and country histories resulted in somewhat different industry structures in distribution, print process, and other factors than the comparatively homogenous U.S. industry.

As far as technology, there are fewer differences than even a decade ago. I remember many comments about Europe being five years behind or five years ahead for many things. I don't hear those things much any more.

Q. Are labels a good ancillary business?

A. They're not really an ancillary business because they are a different market. It may start as an add-on business, but it will eventually lead to new customers and new applications.

Q. Where does data for commercial print and digital print fall in your projections?

A.It all depends where it is produced. Digital printing can be produced in corporations, packaging plants, newspapers, and all kinds of locations, including commercial printing businesses. Digital print is a process, commercial printing is a business segment. For our data, we define commercial printing as NAICS 323 in the Commerce Department data, a classification system that replaced the old Standard Industrial Classification (SIC) system. The NAICS system is shared by the U.S., Canada, and Mexico.

There are commercial printers whose volume is dominated by digital, but there are also many printers who have a range of processes.

Q. What economic factors will it take to bring real growth back to the larger commercial printers?

A. What are the major products in the large commercial printing segment? Magazines, catalogs, and newspaper inserts. Magazine printing has been depressed by the availability of information online. Catalogs have been affected by e-commerce. Newspaper inserts have suffered with declining newspaper circulations. Real growth for the industry is different from real growth for individual firms. That can be accomplished in many ways.

Q. Do you think that direct mail printing has decreased due to postal increases? Or is something else driving this?

A. The volume of direct mail has decreased because of the availability of alternatives. Postal increases, set by a commission on a cost-plus basis, and not on the competition of the information distribution marketplace, have only made it worse. There is an increase in direct mail post cards, but e-commerce is the primary culprit.

Q. Was the stimulus package Congress passed in February too little, too late?

A. It was doomed to be meaningless from the start. It's only added to inflation because those dollars were not created by an economic process such as manufacturing, services, or investment. Any suggestion that they staved off recession is wishful thinking.

Q. How about the credit card problem...an increasing number of defaults...some predict that it will result in problems worse than housing and push the country into depression...

A. This has always been predicted and never happens. The default figures are never adjusted for population growth, and besides that, the default figures don't go back that far (but at least we're spared the “worst credit card defaults since the Great Depression” headline so popular in the press... since there were no cards then). Credit cards are not a problem, but rather a solution that provides great benefit in facilitating economic transactions, such as travel. Remember, credit cards, if credit card lines of credit are used, are unsecured loans, and already have higher interest rates. They also allow companies large and small to eliminate the need for credit departments and the management of credit, offloading those functions to financial organizations. Within seconds, a transaction can be completed with an unfamiliar buyer, rather than having to collect and analyze financial information and determine the nature of the risk. The subprime crisis was created when the properties that secured the loans were overpriced and therefore no longer liquid, with the loan-maker and the loan-taker essentially lying to each other. Credit cards, on the other hand, are constantly measured and monitored, especially against fraud. They're actually a better risk than dubious mortgages.

Q. Dr. Joe, have you considered using economic statistics as reported by shadowstats.com to evaluate what the government reports? Looking at CPI, for example, shadow reports that we are more likely experiencing 10-11% and not 3-4%. Who can really believe what the government reports? It is clearly way underreported...of course no one drives or eats food, for example. Also, the Fed no longer reports M3 because they don't want us to know how fast the money supply really is increasing. Comments?

A. Yes, I have looked at the shadowstats.com site. It does have a conspiracy feel to it. There are some reasons to believe many of the things written there, but they don't always hold water. The problem with the CPI, supposedly, is that it was rigged to show lower inflation than there really is. If that's the case, then there are numerous indicators of inflation to choose from. This is not so dissimilar from those who constantly harp about the lack of a gold standard to back up money. If the value of gold was $800 in January 1980, then it should be around $2,400 today. It's not; it's around $900. If that's the case, then we really haven't had any inflation for the last 28 years, and we know that's not true.

CPI has some anomalies now and then, and the Mises Institute had an excellent article about a recent CPI report where it reported energy prices going down according to their methodology. I wrote about the issues in inflation adjustment in a recent column.

As far as M3 is concerned, it does sound ominous, doesn't it? The Fed's press release explains it, and the data to rebuild it are freely available in the Fed's Flow of Funds report. There are so many indicators to choose from, government and private, and even from the individual Fed Banks. There's no conspiracy here, unless you think that hiding the data in plain sight in the form of a PDF does that.

Gene Epstein's Econospinning may be the best discussion of government data, especially employment data, that I have seen. It's not just for data wonks.

As for whether or not to believe government data, I often hear that comment. Read the methodology, know what's included and what's not, and you'll get a better sense that about their efforts, consistency, and controls. Some of the most elegant statistical work is done at the Census Bureau and in other departments. Reading their research papers about changes in methodology could bore one to tears, but you do get a sense that the process is well documented and does exactly what they say it does.

Q. What effect is importing having on U.S. print consumption?

A. If it's for packaging used in goods imported here, it's probably in the range of $8 to $10 billion. No one seems to mention the amount of package printing that might be exported from here, of course, which is substantial, probably in the $3 to $5 billion range. As far as commercial printing, the U.S. has had a surplus overall for the past few months. There's about $3 billion of commercial printing imported, and we send a little more out. I've always found it astonishing that the Internet could rob the industry of $70 billion in print, yet everyone is horrified that less than 3% of printing shipments are imported, and they neglect to take into consideration our own exports.

Q. Where do you see as the next frontier for importing after China?

A. Your question almost sounds like a set-up, because these economies are called “frontier markets.” There's a good article in the Christian Science Monitor about them. I put a partial list together.

Frontier Markets: Central and Eastern Europe: Bulgaria, Croatia, Estonia, Kazakhstan, Romania, Slovenia, Ukraine; almost all of the non-Israel Middle East and oil-exporting countries; African countries of Botswana, Kenya, Mauritius, Nigeria, and Tunisia; and in Asia, countries such as Malaysia, Sri Lanka, Vietnam.

These markets are small, and have great risks as their political and legal systems are not well-established in terms of the conduct of modern business. I strongly recommend the book Emerging Markets Century and also the Index of Economic Freedom, a free download, for more insights.

The definition of "emerging" or "frontier" can change. This Wall Street Journal article shows some changes now being considered. "South Korea and Israel are in line to graduate into the category of developed markets... Argentina and Colombia, meanwhile, face being downgraded from emerging to "frontier" markets -- or countries with significant hurdles to foreign investment. Jordan is set to drop out of the emerging category and into the frontier category late this year because of its small size and relative lack of [stock] trading."

http://online.wsj.com/article/SB121382668657486273.html?mod=hpp_us_whats_news

Q. Can we could get an executive summary on the economic outlook from Dr. Joe that we could send to our clients to allay their fears of an impending recession?

A. Sure, you can download the slides from our webinar page and give them the ones you suspect will help them most. The only risk to you is that I could be wrong... although as economist Michael Evans always says: “I may be wrong, but I'm never in doubt.”

If you have questions about this webinar, please send an email to help@whattheythink.com

Dr. Joe’s Summer Reading List

If you attended the webinar, you know that there was a problem with the reading list links not working. Here they are. Enjoy!

Morgan Stanley Internet Trends just published 6/12/2008; great stuff about social networking, new gadgets

Amazon Kindle – As big as the iPod? Look at the Kindle on amazon.com Why is it called the Kindle? Could it be a burning reference to this book?

Business Week “Mistakes to Avoid During a Downturn”

What kind of economist are you? Take the test!

“Truths About Trade,” 2004 article from Reason

Failure… is good (Forbes via CNN/Money)

Association of National Advertisers press release : “Integrated marketing communications is now broadly embraced by marketers… 74% of marketers now employ it campaigns for most, if not all, of their brands.”

Deloitte Industry Outlook– good overview of major industries and their dynamics

Core inflation as volatile and an inflation predictor is dubunked by the Philadelphia Fed

“Yesterday’s Tomorrows” – Reason magazine’s discussion of predictions of the future and how they were wrong

About MindFireInc

Since 1999, MindFireInc has been the leader in helping marketers link the impact-power of direct mail with the interactive capabilities of the Internet. MindFireInc's flagship product, LookWho'sClicking™, is a web-based application suite that automates the creation, management, and tracking of Marketing Campaign's utilizing Personalized URLs and VIP Landing Pages. The company delivers LookWho'sClicking™ through its expanding network of Solution Partners, which are typically print service providers, agencies and consultants. With offices in California and Asia-Pacific, MindFireInc is a privately held company led by a seasoned management team with proven industry success. For more information, please visit www.MindFireIncinc.com.

About WhatTheyThink.com

WhatTheyThink.com is the printing and publishing industry's leading online media organization; offering a wide range of publications delivering unbiased, real-time market intelligence, industry news, economic and trend analysis, peer-to-peer communication, and special reports on emerging technology and critical events. Serving a membership base of more than 50,000, WhatTheyThink.com also hosts webinars and live events as well as providing content through a syndication program, which delivers content directly to related websites and through RSS.

About Dr. Joe Webb

Dr. Joe Webb is one of the graphic arts industry's best-known consultants, forecasters, and commentators. He is the director of WhatTheyThink.com's Economics and Research Center.

A 30-year veteran of the graphic arts industries, he was the founder of the influential TrendWatch information service, which was sold to Reed Elsevier in 2000. Since January 2003, his "Mondays with Dr. Joe" column has become a must-read feature on WhatTheyThink.com, as have his quarterly economic forecast webinars, where he analyzes trends in the economy, technology, and the industry, interpreting what they mean for executives and their strategic decisions.

He is a Ph.D. graduate of the NYU Center for Graphic Communications Management and Technology (1987) and serves on the Center's Board of Advisors. He holds an MBA in Management Information Systems from Iona College (1981) and was a magna cum laude graduate in Managerial Sciences and Marketing from Manhattan College (1978), and was a member of the economics honor society. He has taught graduate and undergraduate courses in marketing, market research, quantitative analysis, business policy, and organizational behavior. He started in the industry with Agfa's Graphic Systems Division and was later a marketing executive with Chemco Photoproducts, entering consulting full time in 1987. Among his publications is the controversial "Renewing the Print Industry: A Contrarian's Constructive Perspective."

FREE Webinar

Q3 Economic Outlook Webinar with Dr. Joe Webb June 18, 2008

Webinar Archive

Dr. Joe’s Summer Reading List

Q3 Economic Outlook Webinar with Dr. Joe Webb
June 18, 2008