Operating Costs Will Rise Later This Year

In spite of expected strong economic growth, non-paper costs for printers will increase only marginally in 2004. Enough slack has built up over three slow-growth years to absorb 2004's forecasted increase in spending without either a significant rise in inflation or a worsening of product availability.

Demand is expected to rise while costs remain steady. However, by mid-2005, the cumulative increase in demand will tighten supply conditions. Though credit costs will rise a little, they will still be well below most of the 1990s. Equipment prices, which have been declining for several years, now are likely to rise a little in a stronger economy.

Wage rate increases will average under 3% again next year while benefit costs soar to nearly 10%, with health insurance premiums 15% higher. Many states also will increase the unemployment insurance tax substantially next year to rebuild depleted fund balances.

Inflation for other supplies and services will be halved to about 1% in 2004, entirely due to less inflation in energy prices. High labor productivity gains will again reduce the labor cost per unit of product—an estimated 2.3% next year. This will keep general inflation subdued, but it will also continue the pressure from customers for printing price cuts. Only imported machinery and materials and raw commodities will experience a significant pick-up in price inflation next year.