Office supply cabinet may provide indication of economic growth

November 9, 2012

U.S. manufacturers looking for an indication of how the economy is moving forward in the aftermath of the presidential election could find that their office-supply cabinet holds a number of answers.

According to The Washington Post, manufacturing strategy could be influenced by the level of durable goods that a company has in stock, with some industry analysts believing that economic trends are easier to predict when counting the pens in a cupboard. A report recently released by the Institute for Supply Management showed that non-manufacturing businesses experienced a slower expansion in October than their manufacturing counterparts, but figures released by major office suppliers painted an interesting picture.

Manufacturing companies will always need to purchase office equipment and supplies for their non-factory workforce. When the economy is in a healthy position, more workers are being hired as manufacturing orders increase, however if the pace of growth is slowed, then office employees can be instructed to cut down on using unnecessary amounts of paper, pens and even paper clips.

Third quarter earnings figures released by Office Depot and Office Max both showed a decline in sales, with an average 5 percent drop from the same point in 2011. Office Depot reported that it had experienced an operating profit swing from $19 million in 2011 to a $55 million loss in 2012, while Office Max saw profits drop by $8 million in the same financial period.

"We expect the tough economic environment in the United States and Europe to continue through at least 2013," said Neil Austrian, chief executive of Office Depot. "We will continue investment in store downsizing, e-commerce and services. The new strategic plans will position us to see further growth when the economies of the U.S. and Europe improve."

While this may seem like an unusual method of determining future manufacturing strategy, there are other trends that companies can follow to determine economic growth. The sales of cars and the rise of house prices can be one indicator, as can a rise in the consumer confidence index but while industrial production is a tangible figure, the waters of business strategy can be muddied when taking into account non-tangible industries such as insurance or the cost of medical cover.

The manufacturing industry has gone through some tough times in recent years, but with the presidential race now concluded, there are indications that the re-elected administration has the health of the economy as a firm priority. Office supplies may be a small part of the overall picture, but in the event of economic growth, manufacturers will need to make sure that the cupboard is filled with enough pens to take note of every new order.