UniCredit Bank Austria industry report on the printing sector:
Austrian printing industry anticipates declining sales in 2023
- Decline likely in printing sector in 2023 following sharp increase in nominal revenue of 12.8% in 2022
- Significant slowdown in consumer and advertising spending putting brakes on printing revenue in 2023
- Lack of market power driving up cost pressure in printing sector
- EUR 131 million export surplus for other printed products indicates strong competitive position of certain parts of printing sector
- Printing sector feeling effects of often saturated demand for analogue products, with only 30% of domestic advertising budgets flowing into print-relevant media, compared with 63% ten years ago
Over the past two years, the printing sector has returned to strong sales growth for the first time since 2010. In 2022, industry revenue rose by 12.8% to EUR 1.9 billion. The sector benefited from the recovery of private consumption, which rose by an average of more than 4% in real terms in 2021 and 2022. Nevertheless, in 2022 the order situation in the printing sector was still being impacted by the fact that additional consumer spending was increasingly directed towards services and less was being spent on print-relevant advertising. Printers anticipate a drop in revenue in 2023, primarily because consumer demand is expected to fall slightly in price-adjusted terms.
"The printing sector cannot expect an upswing in the long term without some bumps along the way, because the challenges posed by the spread of digital media are not diminishing. However, demand for printed packaging and the need for printed advertising materials, along with the increased use of digital printing, should all continue to drive growth in printing output in the future", says Günter Wolf, Economist at UniCredit Bank Austria.
Weaker consumer and advertising spending put brakes on printing economy in 2023
The commercial success of the printing sector is dependent almost entirely on private consumption. There is household spending on leisure reading, plus demand for printed packaging materials and advertising spending, which in turn stimulate consumer spending. Around 30% of gross advertising expenditure in Austria—around EUR 2 billion a year—still flows into print-relevant media, where it indirectly influences the circulation figures for newspapers and magazines via advertisements or is used directly in the form of printed brochures, newspaper inserts or posters. Ten years ago, 63% of advertising expenditure in Austria was used for campaigns in this segment.
In the first quarter of 2023, the printing sector posted nominal sales growth of 6% on average. Since April, the printing economy has cooled, sales have declined and the fall in employment observed in the industry since the start of the year has accelerated to more than 4%. In the economic survey in June 2023, on balance the majority of companies once again classified their order situation as too low.
Printing companies will continue to lose orders in the second half of 2023 as a result of the slowing industrial economy and, above all, weak consumer spending. This will reduce demand from the packaging and advertising industries. Advertising spending on print-related media had already fallen by an average of 4% in nominal terms by May. Looking at the average for the year, printing companies are likely to face a nominal decline in sales of around 5%.
Lack of market power driving up cost pressure in printing sector
Given that the sector tends to consist of relatively small companies, especially when compared to the paper industry, printing companies are generally unable to reflect increases in paper prices in their producer prices, or can only do so with a delay. Regardless, the significant increase in paper prices since the fourth quarter of 2021 has significantly affected the earnings of printing companies. In 2022, wholesale prices for paper and cardboard in Austria rose by a total of 23% and by a further 15% up to April 2023. Only in the last two months has the price increase slowed to an average of 4%. At the same time, the printing companies’ producer prices only increased by 2.8% on average.
EUR 131 million export surplus for other printed products indicates strong competitive position of certain parts of printing sector
Around 20% of the books, newspapers, catalogues and other printed products sold in Austria each year are imported. In 2022, this equated to printing and publishing products worth EUR 845 million, with the value of exports sitting at EUR 543 million. The overall export deficit of EUR 303 million in this goods category is attributable primarily to the fact that, being a small market, Austria is not an ideal location for book production. In 2022, the trade balance deficit on books reached EUR 341 million, of which EUR 275 million was from trade with Germany.
By contrast, there is an export surplus of EUR 131 million for other printed goods, including printed advertising materials and catalogues. It is worth noting that the balance of foreign trade for other printed products has improved steadily between 2019 and April 2023. "In 2022, the growth in exports of other printed products accounted for more than a third (EUR 58 million) of the printing sector’s overall increase in revenue. The results are an indication of the competitive strength of certain parts of the printing sector in Austria", says Wolf.
Printing sector feeling effects of often saturated demand for analogue products
Since 2008, spending by Austrian households on books, newspapers and other print media has risen by only 0.6% per year in nominal terms, compared to an average of 2% in the ten years before that. Advertising expenditure on print-relevant media has also decreased. This expenditure is either used directly in the form of printed brochures, newspaper inserts or posters, or indirectly influences the circulation figures for newspapers and magazines via advertisements. Even as recently as ten years ago, this segment made up 63% of gross advertising expenditure in Austria, compared to just 30% in 2022.
A reversal of the trend and significant growth in demand for printed products are not to be expected in the future either. It is increasingly unlikely that the additional demand from the consumer goods industry for printed products, especially packaging and delivery boxes, will be able to offset the losses in other segments. Advertising in print media or in the form of advertising inserts and printed brochures is still considered to be very effective. This tool has a higher visibility than online advertising, the content leads to a better understanding of the brand and more successful establishment of brand awareness, and its distribution can be highly targeted. However, even food retailers are now starting to look for digital ways to reach their customers, with some market participants – in Germany at least – already no longer using advertising brochures.
Enquiries:
UniCredit Bank Austria Economics & Market Analysis Austria
Günter Wolf, Tel.: +43 (0)5 05 05-41954;
Email: guenter.wolf@unicreditgroup.at