Still Geared up for Gradual Recovery

The Mold Business Index (MBI) for March 2010 is 44.7. This is a 0.4-point decrease from the February value of 45.1, but it is a 3.4-point increase over the MBI value of 41.3 from March of last year. The first quarter has historically been the weakest season of the year for our MBI. However, the recent data indicate that the seasonal rate of decline in business activity for moldmakers this year was less steep than it has been in recent years. This month's data are consistent with our forecast of a gradual recovery in the mold industry. The bad news is that Mold Prices remain under pressure, and there is upward momentum building for Materials Prices. The industry's Future Expectations are more optimistic than they were a month ago.

The overall U.S. economy performed better than many forecasters anticipated in the first quarter of 2010, and the March data suggest the recovery is gathering momentum. The economy did not grow as fast as it did during the fourth quarter of 2009 yet real GDP is still on track for a solid gain of 3% in the first quarter. The solid gain in the employment numbers for March indicates businesses are responding to better profits and stronger final demand. Financial market conditions remain supportive for growth, and rising equity prices are increasingly positive for household net wealth and consumer spending. Due to aggressive incentives by automakers, March vehicle sales escalated to an annual rate of 11.8 million units, the strongest showing since cash for clunkers temporarily inflated sales last summer.

The ISM manufacturing index increased from 56.5 to 59.6 in March. This gain puts the index at its highest level since 2004. The ISM nonmanufacturing index increased by 2.4 points to a healthy 55.4 in March. Taken in combination, the ISM surveys are a good predictor of GDP growth, and they averaged a solid 55.6 in the first quarter. This is up from the fourth quarter's average of 52.0, and it is the highest quarterly average since 2006. Details of the ISM report showed manufacturing has plenty of momentum heading into the second quarter.

As for our MBI, the number of New Orders for molds declined for the sixth straight month in March. The rate of decline was slower than it was in the first quarter of last year, and this data should soon rebound. This sub-index for March is 39.5. Production activity held steady, as the latest Production sub-index is 50.0. The Employment component was also 50.0 indicating that there was no change in overall payrolls. Fewer new orders combined with steady production levels resulted in a decrease in backlogs, as the Backlog component is 36.8 for March.

The Mold Prices sub-index for March is 42.1. This suggests that the pressure from customers to lower the price of new molds remains intense, but this pressure may be moderating. The prices paid for materials are higher, as the latest sub-index for Materials Prices is an elevated 63.2. Supplier Delivery Times were a bit slower, as this sub-index posted a value of 42.1. There was no change in the number of offshore orders for new molds, as the Export Orders sub-index is 50.0.

The most-cited problems confronting North American mold makers in recent weeks are low mold prices and getting paid on a timely basis for work completed. Other problems receiving multiple mentions were: the shortage of qualified personnel entering the industry; the sluggish economy; and the credit crunch.

Our Injection Molding Business Index (a measure of production levels for injection molders) increased in the first quarter of 2010 when compared with the previous year. This Index is expected to gain momentum gradually throughout 2010. The latest forecast calls for a gain of 7% in the coming 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 moldmakers. 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.

MARCH 2010
	% Positive	% Equal	% Negative	Net % Difference	Sub- Index
New Orders	21	37	42	-21	39.5
Production	26	48	26	0	50.0
Employment	26	48	26	0	50.0
Backlog	26	21	53	-27	36.8
Export Orders	0	100	0	0	50.0
Supplier Deliveries	0	84	16	-16	42.1
Materials Prices	26	74	0	26	63.2
Mold Prices	0	84	16	-16	42.1
Future Expectations	53	31	16	37	68.4

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