Q2 2021 Print Business Indicators: Sales Are Rising, But Operating Cost Inflation, Labor Shortages Persist

Recovery has begun for the printing industry. Sales are growing and confidence is on the rise. But operating cost inflation and labor shortages are squeezing margins industry-wide. No one knows how “transitory” the cost inflation will be because no one has ever shut down and then reopened the American economy. And nothing suggests the labor shortages are temporary.

Those are primary conclusions of the second quarter 2021 Print Business Indicators Survey. The survey is part of the State of the Industry Research Program conducted by PRINTING United Alliance and NAPCO Research, and generously sponsored by Konica Minolta.

More than 78.0% of companies surveyed report their sales increased last quarter, while just 9.6% report the opposite. On average, sales were up 10.1%. The gains are over year-earlier levels, which were deeply depressed by the start of the COVID-19 pandemic, and leave sales far short of pre-crisis totals. Nevertheless, they are a significant improvement over the first three months of 2021, when sales increased for 37.1%, decreased for 62.9%, and were down 9.5%, on average.

Equally encouraging, 64.8% of our research group report work-on-hand is rising, up from 36.7% three months ago; 60.8% expect to make a capital investment over the next 12 months, up from 39.1% at the close of 2020; and 73.2% expect their full-year 2021 sales to exceed full-year 2020 sales.

Reports about costs and labor markets are not as encouraging. Specifically:

• 91.3% report per-unit operating costs have increased this year, by an average of 10.2%. Per -unit costs are up 5.0% or more for 88.8%, 10.0% or more for 50.6%, and 15.0% or more for 27.0%. Substrate costs, shipping/transportation costs, and employee compensation are rising most. On average, 46.8% of the cost increase has been passed along as higher prices, 20.5% offset by efficiency gains, and 32.7% absorbed.
• 69.6% are having trouble hiring. When asked which positions are most difficult to fill, production positions (skilled and unskilled) were cited most often, but responses such as “all positions from front office to the back dock and everyone in-between” were not uncommon.
• 82.6% have increased compensation in response to the labor shortages, 56.5% have made work hours more flexible, 24.4% have increased benefits, and 24.4% have taken a range of other actions, such as offering signing bonuses.
• 25.5% report employees are hesitant to return to work. Generous unemployment benefits was the most frequently cited reason, followed by lack of childcare options and health concerns.

The bottom line: Maximizing productivity and working smarter company-wide will be just as important during recovery as it was during recession. The big winners will make capital investments that boost efficiency, speed, and automation; squeeze steps out of processes; invest in employee recruitment, retention, and development; and maintain urgency, no matter how good business gets. They will also figure out how client needs, preferences, and behaviors are changing in the aftermath of COVID-19; which of the changes are temporary, and which are structural. Moreover, they’ll figure it out before the competition.

The complete results of our survey will be included in the Print Business Indicators Report to be published in mid-August. The report will also include a forecasting for printing industry sales growth, an outlook for the American economy, and trends in printing establishments by region. PRINTING United Alliance members can download the report at www.sgia.org/resources/research. Non-members can download an executive summary at the NAPCO Media website.