Commercial Printing - Sample XX/XX/200X CRITICAL ISSUES UPDATE Dependence on Business Activity - Gross domestic product (GDP) increased 5.3 percent in the first quarter of 2006, a positive indicator for the printing industry. Fluctuating Paper Costs - Paper producers raised prices 4.3 percent in May 2006 from year-ago, increasing printers' raw material costs. QUARTERLY INDUSTRY UPDATE Ink, Paper Costs Increasing Quickly - Prices of material used in commercial printing are rising faster than average. Higher paper and ink producer prices increase costs for commercial printers. From March 2005 to March 2006, producer prices for ink increased over 4 percent, and grew nearly 3 percent for pulp, paper, and allied products, according to the Bureau of Labor Statistics (BLS). The most recent producer price increases exceed ten-year average price growth of less than 1 percent for ink and 1 percent for pulp, paper, and allied products. Machinery Prices Show Weak Growth - Printing machinery prices continue to grow very slowly. Stable machinery costs benefit commercial printers seeking to expand or replace production capacity. March 2006 producer prices for printing machinery and equipment exceeded year-ago producer prices by only 1 percent, according to the BLS. From 1997 to 2006, producer prices increased by an average of only 0.7 percent per year. Printing Production Volume Jumps Higher - Commercial printers are busier than in the previous year. Higher production activity may indicate rising demand for printing services. In March 2006, production volume for printing and support services increased nearly 5 percent over year-ago, based on Federal Reserve data. Recent growth exceeds the almost 2 percent growth in production from fourth quarter 2004 to fourth quarter 2005. Commercial Printing SIC Codes: 2732, 2752, 2754, 2759 www.firstresearch.com (866) 788-9389 ©2006 by First Research, Inc. All Rights Reserved.