Next Recovery Phase Expected Late this Year

41.3
Total Mold Business Index for February 2009
The total Mold Business Index is a weighted average of the sub-indices for new orders, production, employees, backlog, exports and supplier deliveries.

The Mold Business Index (MBI) for February is 41.3. This is a 0.8-percentage point decrease from the January value of 42.1, and it is slightly lower than the MBI value of 41.7 from February of last year. Supplier Delivery Times were a bit faster on average, and Materials Prices were flat-to-down. Decreases were registered in all of the other core MBI components, and the Future Expectations component fell to a pessimistic 35.0 in February.

We still expect that the next recovery phase in the plastics business cycle will begin late this year. Until then, the manufacturing sector will have to struggle through the worst economic downturn since the Great Depression. Total output of plastics products will decline in 2009, but most of the negative growth will occur during the first half of the year. The U.S. economy contracted very quickly in the fourth quarter of 2008, and it is on pace to suffer a similar decline in the first quarter of 2009.

The rate of decline in the data will moderate during the second and third quarters of 2009, and the effects of the recently passed stimulus legislation will start to bolster the economic data in the second half of this year. This means that total demand for new molds and tooling will remain sluggish until late-2009 and 2010.

Our Injection Molding Business Index (a measure of production levels for injection molders) dropped precipitously in the fourth quarter of 2008 when compared with the previous year. The amount of decline in this indicator during the second half of 2008 most likely overstated the true decrease in the actual market demand for these products, but the Index is not expected to recover until the third quarter of this year.

After a drop of 12 percent in 2008, the annual change in our Index is forecast to be flat-to-slightly-higher in 2009. Most of this expected growth will occur in the second half of this year. 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 moldmaking industry lags the trend in the processing sector by about six months.

February 2009

%
Positive

%
Equal

%
Negative
Net % Difference
Sub-
Index
New Orders
25
35
40
-15
42.5
Production
15
40
45
-30
35.0
Employment
10
60
30
-20
40.0
Backlog
15
25
60
-45
27.5
Export Orders
0
95
5
-5
47.5
Supplier Deliveries
20
70
10
10
55.0
Materials Prices
5
55
10
-5
47.5
Mold Prices
0
60
40
-40
30.0
Future Expectations
20
30
50
-30
35.0

 

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Economic Growth Slows; Expectations Positive 41.7 Total Mold Business Index for February 2008

Overall economic growth in the U.S. is sputtering so far this year, and this is constraining demand for new molds in the first quarter of 2008