Momentum Forecast to Build in Second Half of 2009

The U.S. economy remains mired in the worst downturn since the Great Depression, and nowhere has the pain of the recession been felt more acutely than in the American manufacturing sector. But despite the decline in consumer spending and overall economic activity in the fourth quarter of 2008, our Mold Business Index (MBI) held up pretty well in recent weeks. The MBI for January is 42.1. This is a 3.5-percentage point increase from the December value of 38.6, and it is also higher than the MBI value from January of last year. Decreases were registered in all of the core MBI components, and the Future Expectations component fell to 45.0 in January.

We have lowered our forecast for the mold market substantially in recent months, and we now expect that the next recovery phase in the plastics business cycle will not begin until the third or fourth quarter of this year. One ray of optimism we can offer is that the actual levels of demand for molds and tooling should not decline much from where they are now. This is because the economy contracted very quickly in the fourth quarter of 2008, and most likely overshot the true underlying change in the supply and demand fundamentals. The Federal Reserve Board responded to this rapid decline in both activity levels and confidence levels by aggressively lowering interest rates, and Congress will soon get a stimulus package passed.

The combination of these factors will keep a floor under the economy for a few months, and then the momentum will build in the second half of 2009. Total demand for new molds and tooling will remain close to the current level in the first half of this year before establishing a gradual uptrend in 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 overstated the amount of the 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 15 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.

January 2009
	% Positive	% Equal	% Negative	Net % Difference	Sub- Index
New Orders	35	15	50	-15	42.5
Production	25	20	55	-30	35.0
Employment	10	70	20	-10	45.0
Backlog	35	0	65	-30	35.0
Export Orders	5	85	10	-5	47.5
Supplier Deliveries	15	65	20	-5	47.5
Materials Prices	10	65	25	-15	42.5
Mold Prices	5	65	30	-25	37.5
Future Expectations	35	20	45	-10	45.0