Mold Market Activity Levels Decline 42.7 Total Mold Business Index for June 2008

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

Many manufacturing sectors experience a seasonal slowdown during the summer months, and this combined with the overall economic sluggishness that presently prevails in the U.S. served to put a damper on the mold market in recent weeks. The Mold Business Index (MBI) for June is 42.7. This is a 2.4-percentage point decrease from the May value of 45.1. Declines were reported in all of the sub-indices that measure activity levels except Employment which held steady. Continued increases in the cost of steel and resins kept the Materials Prices component near its all-time high. The Future Expectations component remained positive at 56.0.

All of the important macro-economic indicators from the first half of 2008 showed a slowdown in overall manufacturing activity in the U.S., but the data remain substantially higher than they were during the last official economic recession in 2001. The data from the plastics industry have recorded moderate declines so far this year, but here too the data remain above the levels hit during the last recession. We still believe that the current slowdown in the U.S. economy will be short and shallow by historical standards. This means that total demand for most plastics products, as well as new molds and tooling, will gradually start to increase in the fall of 2008.

However, the risks to this forecast remain heavily weighted to the downside. High gasoline prices and declining home equity values have pushed consumer confidence levels down to rock-bottom. And the equities markets have declined to a level that is at or very near the official “bear market” range. But gasoline demand is declining, and this suggests that prices will soon enter a downtrend. The residential construction and real estate markets will still have to endure another year of pain, but the data suggest that these sectors are now past their cyclical low-points. The American moldmakers will continue to benefit from the low value of the U.S. dollar throughout 2008, while Canadian moldmakers will remain pressured by the exchange rate situation for at least a few more quarters.

The sub-index for New Orders of molds was 40.0 in June, indicating that new business levels were down for the month. Production levels also posted a decline, as the latest Production sub-index was 42.0. The Employment component was 50.0, which means that there was no net change in overall payrolls last month. Fewer new orders resulted in a substantial decrease in backlogs, as the Backlog component was only 30.0 in June. The Mold Prices sub-index for the latest month was 40.0, which means that the prices received for new molds continued downward. At the same time, the prices paid for materials increased sharply as the latest sub-index for Materials Prices was 86.0.

June 2008

%
Positive

%
Equal

%
Negative
Net % Difference
Sub-
Index
New Orders
20
40
40
-20
40.0
Production
28
28
44
-16
42.0
Employment
12
76
12
0
50.0
Backlog
20
20
60
-40
30.0
Export Orders
0
92
8
-8
46.0
Supplier Deliveries
8
80
12
-4
48.0
Materials Prices
72
28
0
72
86.0
Mold Prices
4
72
24
-20
40.0
Future Expectations
44
24
32
12
56.0
chart

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