Data Indicates Rise in Business Investment

The Mold Business Index (MBI) for July 2010 is 53.6. This is an 8.5-point increase from the June value of 45.1, and it is a 6.1-point increase from the MBI value of 47.5 registered in July of last year. This month's MBI data are consistent with the strong increase in U.S. spending for capital equipment that emerged throughout the first half of 2010. This rise in business investment occurred despite the fact that growth in the overall U.S. economy decelerated a bit in the second quarter. Mold Prices remain under pressure and Materials Prices continue to rise, but the momentum in both of these trends is abating. The Future Expectations sub-index this month indicates that moldmakers' attitudes about future business levels remain upbeat.

It is now evident that the U.S. economy is recovering at a slower pace than is typical following a severe recession, but make no mistake, it is recovering. Thus far, the pace of recovery has been disappointing but the recovery phase that began just about a year ago is not yet in danger of stalling. Slow improvement is still improvement. While the current recovery will take time to gain steam and become self-reinforcing, it has certainly begun. And though the pace of the economic recovery will be lackluster for the next few months, our forecast of a gradual recovery in the mold industry, and the U.S. economy, during the second half of 2010 remains unchanged. The rate of expansion will then pick up steam in 2011 and 2012.

This forecast is based on a number of conditions that are in place. These include: a robust rise in corporate profits, a long-needed increase in both manufacturing production and spending for capital equipment, and solid business confidence about the future. These conditions will keep the economy moving forward in spite of the sputtering, finger-pointing, and hand-wringing that will likely occur between now and the November elections.

The New Orders component for our MBI in July indicates a decline in new projects for the tenth consecutive month; however, the rate of decline is moderating and it will likely turn positive very soon. This sub-index for July is 46.9. Production activity increased moderately, as the latest Production sub-index is 59.4. The Employment component is 59.4 indicating that there was another increase in overall payrolls last month. The Backlog component is 53.1 for July which indicates that backlogs were stable.

The Mold Prices sub-index for July is 43.8. This indicates that moldmakers continue to report pressure from customers to lower the prices paid for new molds, but this pressure appears to be moderating as the recovery progresses. The prices paid for materials continue to escalate, as the latest sub-index for Materials Prices is 59.4. Supplier Delivery Times were again steady-to-slower, as this sub-index posted a value of 46.9. There was another increase reported in the number of offshore orders for new molds, as the Export Orders sub-index is 56.3.

The most-cited problem confronting North American mold makers in recent weeks was finding and keeping skilled employees. Other problems receiving multiple mentions were: the politicians in Washington D.C. and the unfair U.S. trade policies; getting paid in a timely manner; price pressures; and the credit crunch.

Our Injection Molding Business Index (a measure of production levels for injection molders) posted another solid increase in the second quarter of 2010 when compared with the previous year. This Index is expected to register positive growth momentum throughout 2010. The latest forecast calls for a gain of 8% this year. The total amount of injection molded goods produced was flat-to-slightly-higher in 2009 when compared with the previous year. Consistent gains in the Mold Business Index depend on sustained growth of 4% to 5% in the output of injection molded products. The trend in the mold making industry lags the trend in the processing sector by about six months.

The Mold Business Index is based on a monthly survey of North American mold makers. 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.

 

JULY 2010
	% Positive	% Equal	% Negative	Net % Difference	Sub- Index
New Orders	31	31	38	-7	46.9
Production	44	31	25	19	59.4
Employment	31	56	13	18	59.4
Backlog	31	44	25	6	53.1
Export Orders	13	87	0	13	56.3
Supplier Deliveries	6	81	13	-7	46.9
Materials Prices	19	81	0	19	59.4
Mold Prices	0	87	13	-13	43.8
Future Expectations	44	43	13	31	65.6

The total Mold Business Index is a weighted average of the sub-indices for new orders, production, employees, backlog, exports and supplier deliveries.