Consumer Goods and Medical

Consumer goods production and medical care spending are both growing rapidly.

Consumer Goods Production Sees Fastest Growth Since February 1999
The prospects of the consumer goods market for moldmakers have improved since May’s update on this market segment. Spending on molds tends to correlate with industrial production of consumer goods. At the time of the last update, consumer goods production was growing at an annual rate of roughly 2.5 percent. Since that time, the rate has spiked to 3.1 percent, the fastest rate of growth in consumer goods production since February 1999. Based on recent month-over-month growth rates, the annual rate of change should continue to accelerate, perhaps up to 3.5 percent, over the next quarter. This should help to spur production of and spending on molds.

However, the potential growth in consumer goods production may be somewhat limited by the relative weakness in consumer goods spending. The rate of change of consumer spending has remained constant at 2.4 percent since November 2013, and it looks like this may be the fastest rate of growth unless accelerating growth in real disposable income can spur further increases in consumer spending. Therefore, unless the rate of growth in disposable income picks up significantly, real consumer spending growth should remain relatively flat, at best. This would lead to slower growth in consumer goods production and reduced spending on molds for consumer goods.

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Medical Care Spending Growing Rapidly
As reported in the last update on the medical industry, the month-over-month growth rate in medical care spending was near historic levels at the beginning of 2014. However, the data has since been revised rather significantly. The Bureau of Economic Analysis was and likely is having a hard time estimating medical care spending due to the significant changes from Obamacare. As a result of this, the annual rate of growth in medical care spending was accelerating rapidly. Once the data was revised, however, it showed that the actual growth rate in medical care spending has been relatively flat since August 2013. 

As a result of this incorrect estimate of medical care spending and the forecasted effects of Obamacare, medical equipment production grew rapidly in the early part of 2014. The annual rate of change likely will grow faster for a few more months, however, unless spending picks up, growth in production will peak around the end of this year.

According to our business index, the medical manufacturing industry generally was slowing down in 2013, but this year the industry has seen rapidly accelerating growth. It is currently growing at the fastest rate since the summer of 2012. New orders are booming. Production also is expanding at a strong rate, but the rate of expansion is near the lows of 2014. Backlogs are improving significantly, which indicates that capacity utilization at medical manufacturers should be rising soon, as should capital equipment investment.

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