Consumer Products and Automotive
Consumer Goods Production Growing Faster
Spending on molds correlates with industrial production of consumer goods. Since February, consumer goods industry prospects for moldmakers have improved. At the time of our last update, consumer goods production was growing at annual rate of roughly 2 percent. In the last three months, that annual rate of change has increased to 2.5 percent, its fastest rate of growth since January 2006. Based on recent month-over-month growth rates, the annual rate of change should continue to accelerate to 3.5 percent over the next quarter, and this should spur production of and spending on molds.
However, the potential growth in consumer goods production may be somewhat limited by the relative weakness in consumer goods spending. Since July 2012, annual growth in real consumer spending has been stuck in the narrow range of 1.9 to 2.2 percent. This is significantly below the historical average of 3.3 percent. While growth in real consumer spending may tick up to 2.2 or 2.3 percent in the coming months, it doesn’t appear that it will grow much faster than that. The primary reason for this is that real disposable income, its best leading indicator, is at its slowest rate in the last four years. Therefore, unless growth in disposable income picks up significantly, real consumer spending growth should remain relatively flat. This would lead to slower growth in consumer goods production and reduced spending on molds for consumer goods.