The UK economy is on the brink of recession after the Office of National Statistics announced that GDP shrank 0.2% in Q3, from July to September. A recession will be declared should GDP be in the negative for the final four months of the year as it is widely expected to be.
The manufacturing sector is leading the charge with a 2.3% decline in the three summer months across all subsectors. One of these is wood and paper and printing with a decline of 0.19% in Q3 following a decline of 0.02% in Q2.
But this is not in line with findings from the BPIF’s Printing Outlook survey, which, while peering ahead into gloom, reported a net growth for the Q3 months. So much so indeed that the federation is able to declare that Q3 demonstrated continued recovery in the industry.
This is because 43% of those responding report a rise in output, 41% that output was stable and only 16% that there was a decline. Orders have increased for 48%, declined for 15% with 37% saying that the volume of orders had been static. This is the greatest expectation for the current three months with 52% anticipating static orders, 23% that orders will increase and 25% that orders will drop. This is a negative outlook that is inline with the expectations in the wider economy.
Business confidence for the next period is also dropping into negative territory: 39% at the pessimistic end of the scale compared to 18% who are optimistic.
Unsurprisingly energy heads the list of major concerns for print. Only 17% do not seem to be concerned about energy costs, possibly because much is self generated or a long time supply contract on favourable terms is in place.
BPIF economist Kyle Jardine says: “It would be easy to question why energy costs are currently in the spotlight, given that they only amount to 6% of costs on average. However, a closer inspection on the energy costs component revealed a significant variance in energy costs amongst respondents – from as low as 2% to as high as 30%. Only some of this variance is explained by energy usage patterns across sectors and type of companies – a bigger influence is the timing of energy contracts; companies that have recently come out of an energy contract have been subject to some extreme price increases.”
Energy is followed by the cost of paper, mentioned by two-thirds of printers, increasing wages for 40% and overly aggressive pricing, once the chart topping issue, on 37%.
While rising wage costs are of concern, the lack of skilled staff is considered a constraint on capacity by a third of respondents, vying with supply chain difficulties as barrier to productivity. Wages are rising, by 4.1% for the 28% of businesses that had carried out a wage review in the quarter.
Paper price increases have been slowing, partly perhaps in response to economic slow downs across the world. According to consultants at EMGE, among the grades increasing prices in Q3 were LWC up 2%, uncoated woodfree up 4% and coated woodfree, up 6%. This means that 90% of printers who anticipated paper prices would increase in Q3 were proved right. In this Printing Outlook only four out of five printers are expecting paper prices to rise in Q4.
