Registering a Gradual Improvement
After three months of mostly steady conditions, business activity levels for North American mold builders registered a gradual improvement in recent weeks. Our Mold Business Index (MBI) for August is 52.5. This is a 3.2-percentage point increase from the July value of 49.3. Strong gains in the Production and Employment components offset another drop in the Supplier Delivery Times component. The Future Expectations value jumped up to 68.5 in August.
Despite all of the recent volatility on Wall Street and the hand wringing about the sub-prime mortgage mess, most of the manufacturing indicators have held up well in recent weeks. And the evidence continues to point to a gradual increase in momentum for manufacturers in the fourth quarter of 2007. Business investment remains as one of the bright spots in the economic outlook, and the trade data indicates that U.S. manufacturers are increasingly enjoying the benefits that stem from the low value of the U.S. dollar. A spike in energy prices is still a significant risk to economic growth and the residential construction sector will not recover until next year. But overall, the U.S. economy is still expected to continue to grow at a rate that is just slightly below the long-term average for the next few quarters.
After two months of solid gains, the sub-index for New Orders of molds held steady at exactly 50.0 in August. Future gains in the total MBI depend on continuing increases in new orders of molds. Production levels were quite strong, as the latest Production sub-index was 64.8. The Employment component was 57.4, which means that there was an increase in overall payrolls last month. The Backlog component was modestly lower at 46.3 in August.
The Mold Prices sub-index for the latest month was 42.6. This means that the prices received for new molds continue to fall. Several respondents again reported that overcapacity (and the low mold prices that this causes) was the biggest problem currently affecting the North American mold industry. The prices paid for materials increased again, as the latest sub-index for Materials Prices was 64.8. Supplier Delivery Times lengthened substantially, as this sub-index posted a value of 42.6. There was another small increase in the number of offshore orders for new molds, as the Export Orders sub-index was 53.7.
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