Graphic and sign producers were hit hard as the pandemic forced closures in March and April. These firms saw an average sales drop of 52.3%. Since then, things have improved dramatically, but the average change is still negative. From the survey period of early May through early June, sales dropped an average of 17.3%. This drastic improvement was reflected on by one respondent, “April was one of the worst months we've had in 20 years, but we are close to being back to normal levels.”
More than a quarter (27.3%) now report that their sales are increasing over the past 30 days which is much higher than the 5% seen in the last survey. While some are seeing their sales increase, the vast majority (65.5%) of graphic and sign producers are still facing contracting sales.
Index Reports Business Activity Is Still Falling, but Approaching Growth
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 graphic and sign producers closed at 40.9. A reading below 50.0 means more printers report activity is falling than report activity is rising. This follows a reading of 20.3 for the previous iteration of this report, which shows that the segment most likely hit its bottom and is on the right track.
The index of leading business indicators (including work-on-hand, quote activity, production payroll hours, and confidence) closed at 47.8 in early June showing that the segment is nearing expansion but is not quite there. The number reported in the first survey was 19.5. Once again, a reading below 50.0 means more printers report these forward-looking measures of activity are falling than report they are rising. This measure is used to identify the first signs of recovery and how recovery is likely to progress.
Lost Business from Events Being Replaced by COVID-Related Products
Of the businesses that reported an increase in activity, many mentioned their COVID products with their comments. With demand for COVID-related signage increasing, some firms have adjusted and begun picking up these types of orders. One respondent said, “We have lost out on tradeshow and event graphics but have easily made them up in social distancing graphics and related.”
Another echoed this by saying, “COVID-19 related signs are doing well. Most non-COVID products are down…”
Not all were so fortunate as some were not able to replace lost business, “Key parts of our business has completely dried up, i.e., trade shows, building upkeep and maintenance, and event planning.”
As businesses reopen, the demand for these products will continue. However it is integral that firms maintain relationships with their other clients who are not requesting anything at the moment. This will make things much easier once normal demand returns.
PPP Coupled with COVID-Related Work 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 slight employment growth (8.9%), the majority of respondents said that they were holding employment steady. 64.3% said that employment numbers were staying the same, compared to the nearly half (49.4%) who said that it was decreasing two months ago, and it is clear to see that firms have a much better outlook for their employees. Some were able to keep employees on the payroll because the work was there, but others had to utilize the PPP to do so, “We have maintained all staff due to PPP loan - even if we have them staying home. Therefore, employment size has not changed,” said one respondent.
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.
Business Confidence Increased Dramatically
Almost half (46.4%) of the graphic and sign producers surveyed indicated that they expected to see an improvement over the next month. This more than triples the number who said the same thing in April (15.2%). Figure 2 shows the full confidence metrics.
The optimism stems from the fact that more of these firms saw an increase in quote activity and work-on-hand since the last report, as many of their clients have begun to reopen. One respondent saw, “Increases in all activities since May 1. Our major retailer and restaurant customers are back online.”
Another said, “Things are starting to get busy as retailers plan to reopen.”
Some are not so optimistic and are fearful of their ability to stay afloat, “Business decisions and purchasing by brand owner clients are being put on hold, delayed, and/or cancelled. My firm has grave concerns over the next 90 days.”
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.
David reports on economic and industry trends which aim to help printers navigate an ever-changing business environment
He joins the Printing United Alliance research team after beginning his career at Printing Industries of America where he analyzed, reported and spoke on key trends in commercial print and aided in the revitalization of the historic Performance Ratios program.