Overall Moldmaking Activity Levels: Slightly Receding

eAfter posting two consecutive monthly increases, overall activity levels for North American moldmakers receded a bit in February. Based on the latest survey for our Mold Business Index (MBI*), the MBI value for February is 46.3. This represents a 4.1 percentage point decrease from the January value of 50.4. The crucial New Orders and Production sub-indices slipped in February, and more substantial decreases were registered in the measures for Backlogs and Supplier Delivery Times. There was another strong rise in Materials Prices, and this increase in materials costs was made worse by a reported drop in Mold Prices. The Future Expectations sub-index remained high at 77.5.

The latest sub-index value for New Orders of molds is 46.3, which means that the number of orders decreased when compared to the previous month. Despite this decline, the predominant trend in the new orders data in recent months has been a gradual rise. Continued improvement in this component is necessary to generate consistent gains in the other components. Production activity in February also decreased, as the latest Production sub-index is 47.5.

February 2005
	% Positive	% Equal	% Negative	Net % Difference	Sub-Index
New Orders Production Employment Backlog Export Orders Supplier Deliveries Materials Prices Mold Prices Future Expectations	30 18 18 10 0 3 43 18 58	33 60 75 58 100 75 57 55 40	37 22 7 32 0 22 0 27 2	-7 -4 11 -22 0 -19 43 -9 56	46.3 47.5 55.0 38.8 50.0 40.0 71.3 45.0 77.5
Total Mold Business Index for February 2005: 46.3 The total Mold Business Index is a weighted average of the Sub-Indices for new orders, production, employees, backlog, exports and supplier deliveries.

The Employment component for February is 55.0, which indicates that the total payrolls for the industry increased again in recent weeks. The industry’s total backlog decreased, as the February Backlog sub-index is a disappointing 38.8. For the third consecutive month, the Export Orders sub-index is exactly 50.0, which means that the overall number of offshore orders for North American molds did not change in February.

After posting an increase in the previous month, the Mold Price sub-index fell back into negative territory in February to 45.0. Unfortunately, prices paid for materials continued to escalate. The latest sub-index for Materials Prices came in at 71.3. Supplier Delivery Times lengthened again, as this sub-index posted a value of 40.0 in the latest month.

The Future Expectations sub-index for February indicates that moldmakers remain in an optimistic mood, as the latest value was 77.5. However, this uptick in optimism was not matched by any noticeable rise in the reported aggregate capital investment plans for the month.

Foreign competition remained as the most-cited problem. Other problems mentioned were less favorable payment terms, demand for fast deliveries and ill-conceived U.S. trade policies.

Our forecast calls for gradually rising activity in the plastics manufacturing and tooling industries throughout 2005. This would be a continuation of the overall trend in the MBI data in 2004, which registered a gradual, but steady gain. Plastics processors are still in a cyclical upturn in spending on new capital equipment, and the recent increase in total spending on industrial equipment in the U.S. suggests that the total demand for new molds will remain in an uptrend for the foreseeable future. All of the major economic indicators suggest that overall manufacturing levels in the U.S. increased in recent weeks and the U.S. economy’s crucial leading indicators are still in a sustainable growth phase.

This means that our Injection Molding Business Index will continue to expand during the next few quarters. Following a gain of 5 percent in 2004, this Index is forecast to increase another 5 percent in 2005. Consistent gains in the MBI depend on sustained growth of 4 to 5 percent in the output of injection molded products. The trend in the moldmaking industry also lags the trend in the processing sector by about six months. So as demand for molded products expands in the coming months, orders for new molds will continue to rise.

*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.