The U.S. economy performed much better in 2010 than most analysts predicted it would a year ago, and it is set to gather additional momentum in 2011. Forces that impeded growth—such as the housing crash, sluggish consumer spending and the credit crunch—are fading. The outlook is increasingly dominated by factors like healthy corporate finances and pent-up demand. The tax deal passed by Congress adds to our optimism because it will add a significant stimulus to the economy next year. Real GDP is predicted to grow at the robust rate of 4.0 percent in 2011.
This pace of expansion will result in the addition of a substantial number of new jobs by next summer, and the unemployment rate is expected to fall below 9 percent by the end of 2011. The remaining slack in the economy will ensure that core inflation remains tame for another year. Further house price declines are expected in the first half of 2011, but they will be modest. Better job growth, improved housing affordability and increasing credit will combine to revive housing demand in the near future. Investor demand for distressed properties will be strong, because prices have dropped enough for investors to see opportunities in fixing and renting these houses.
The New Orders component for our MBI indicates that the number of new projects was steady-to-better in recent weeks, as this sub-index for December is an expansionary 54.5. Production activity wavered a bit, perhaps due to the holidays, as the latest Production sub-index is 45.5. The Employment component is 61.4, suggesting that hiring activity continues to expand. The Backlog component is mostly steady at 47.7 for December.
The Mold Prices sub-index for December is 47.7 indicating that mold prices are mostly stable. The prices paid for materials continue to escalate. The sub-index for Materials Prices is 65.9. Supplier Delivery Times are again slower, as this sub-index is 36.4. There was no significant change in offshore orders for new molds, as the Export Orders sub-index is 47.7.
The most-cited problem continues to be the shortage of skilled labor. Other problems receiving multiple mentions include: uncertainty about the U.S. economic recovery; getting paid in a timely manner; pressures from customers for lower prices and shorter lead-times; and offshore competition, especially from China.
Our Injection Molding Business Index (a measure of production levels for injection molders) posted another solid increase in the fourth quarter of 2010 when compared with the previous year. This Index registered growth of nearly 7 percent in 2010, and the latest forecast calls for a gain of at least 5 percent in 2011. Consistent gains in the Mold Business Index depend on sustained growth of 4 to 5 percent in the output of injection molded products. The trend in the mold makingindustry lags the trend in the processing sector by about six months.
The Mold Business Index is based on a monthly survey of North American moldmakers. Mountaintop Economics & Research, Inc. conducts the survey, and then calculates a diffusion index based on 50.0. A value above 50.0 for the MBI indicates that business activity expanded in the previous month, while a value below 50.0 means that business levels declined.