The first quarter of 2019 experienced a slowdown in growth, following 2018 Q4’s seasonal boost, and forecasts for Q2 suggest growth will be at a further reduced level according to the BPIF.
The latest Printing Outlook survey shows 43% of printers increased output levels in the first quarter of 2019. A further 32% held output steady whilst 25% experienced a decline in output. The resulting balance (the difference between the ups and the downs) was +18, a significant decline following the seasonal boost from Q4 but not an unexpected one. In fact, Q1 has performed slightly better than forecasted (the forecasted balance was +13).
There were some concerns for performance in the Q1 period, and there appears to have been some polarisation in growth outcomes (i.e. more companies reporting improved output, more reporting deteriorating output and fewer reporting that output had remained stable). The fact that Easter came late this year, and therefore fell outside the Q1 survey period, will have boosted performance in Q1, and will be likely to drag performance down in Q2.
Going into Q2, fewer printers are expecting to see their activity levels increase. However, output growth is forecast to increase for one-third (33%) of companies. 42% of respondents predict that they will be able to hold output levels steady in Q2, and 25% expect output levels to fall. That leaves a forecasted balance of +8 for the volume of output in Q2, which would be greater than last year’s Q2.
Brexit has reclaimed the most voiced business concern, with 70% of respondents selecting it as one of their top three business concerns (up from 58% in Q1). This is only the second time that competitor pricing has been forced from the number one position – now in second position with selection from 50% of respondents (down from 60% last quarter).
Paper and board prices completes the top three, with 47% of respondents selecting it. Access to skilled labour was some way behind in fourth place, whilst late payment and poor output prices were further back in the ranking.
Average prices remained in positive territory in Q1. It is the first time since the 2008 financial crisis that average price movements have been positive for consecutive quarters. Respondents are not currently expecting this to continue into Q2. Just under one-fifth of them (19%) were able to increase prices in Q1, and almost two-thirds (65%) were able to hold them steady. That left 16% of respondents experiencing price reductions in Q1. The resulting Q1 balance (+3), whilst again only just positive, is a significant continuation of positive price movements and the first time this has occurred for 11 years.
Just under three-quarters (72%) of respondents, do not expect to see any change in domestic selling prices during Q2. 17% believe they will be forced to reduce prices, and 11% predict that they will be able to increase prices in Q2. The resulting forecasted balance is -6.
Kyle Jardine, BPIF Economist, said: “There are plenty of comments from survey respondents referring to suicidal pricing, material costs and of course turmoil and uncertainty related to Brexit. However, a number of companies have noted that whilst some clients had been holding back on placing jobs (due to Brexit uncertainty), the floodgates opened slightly as the Brexit timeline was extended and clients were keen to get work ordered and invoiced before the March financial year-ends.
“No matter one’s viewpoint, there aren’t many adjectives left to describe the latest Brexit shenanigans. As fascinating as it has all been there’s no getting around the fact that, whilst most businesses do not appreciate the prolonged uncertainty from the Brexit deadline extension, many are thankful to avoid no-deal, for now. However, there is also a significant proportion of business owners that have had enough and just want it sorted (deal or no deal in many cases).”
Charles Jarrold, BPIF Chief Executive, added: “We know, through our lobbying and representation activities, that the Bank of England’s Monetary Policy Committee are closely monitoring industry surveys for signs of wage inflation, input prices inflation and these feeding through to output price inflation – rather than been absorbed by companies and eroding their margins.”
“As we are all too well aware, our industry has been experiencing climbing input prices and diminishing margins for some time – it is very interesting to see that, for the first time in 11 years, Printing Outlook is showing that there have been more increases than decreases in output prices over consecutive quarters. We will be sure to monitor this closely.”