Deceleration in Economic Growth 38.8 Total Mold Business Index for January 2008

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

Overall economic growth in the U.S. decelerated substantially in the fourth quarter of 2007, and this resulted in a downturn in demand for new molds in the first month of 2008. Our Mold Business Index for January was 38.8. This was a disheartening 14.9-percentage point decrease from the December value of 53.7. Decreases were registered in all of the core MBI components. Yet despite the abrupt decline, Future Expectations stayed somewhat optimistic at 54.3 in January.

In response to the deteriorating economic situation, the Fed has slashed interest rates in recent weeks, and an economic stimulus package is rapidly progressing through Congress. These efforts should be sufficient to avert an outright recession, but the total U.S. economic growth will remain sluggish until this summer. This means that demand for new molds and tooling will not accelerate until the second half of 2008.

The sub-index for New Orders of molds registered 37.0 in January, the lowest level since last April. Production levels also descended, as the latest Production sub-index was 41.3. The Employment component was 39.1, which means that there was a drop in overall payrolls last month. The Backlog component was an anemic 28.3 in January.

The Mold Prices sub-index for the latest month was 45.7. This means that the prices received for new molds were a bit lower. The prices paid for materials increased again as the latest sub-index for Materials Prices was 67.4. Supplier Delivery Times lengthened again, as this sub-index posted a value of 41.3. There was a small decline in the number of offshore orders for new molds, as the Export Orders sub-index was 45.7.

Our Injection Molding Business Index (a measure of production levels for injection molders) held steady in the fourth quarter of 2007 when compared with the previous year. This indicator was pretty much flat for all 2007, but after no overall growth last year, a rise of 4 to 5 percent in market demand for injection molded products is forecast for 2008. Most of this expected growth will occur in the second half of this year.

January 2008

%
Positive

%
Equal

%
Negative
Net % Difference
Sub-
Index
New Orders
26
22
52
-26
37.0
Production
26
30
44
-18
41.3
Employment
13
52
35
-22
39.1
Backlog
17
22
61
-44
28.3
Export Orders
0
91
9
-9
45.7
Supplier Deliveries
4
74
22
-18
41.3
Materials Prices
35
65
0
35
67.4
Mold Prices
9
74
17
-8
45.7
Future Expectations
30
48
22
8
54.3
chart

 

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