Moderate Improvement in Business Activity

After a slow start in the beginning of the year, the sub-index for New Orders of molds sprang back to life this spring. New orders are the life blood of any industry, and a gradual uptrend in mold orders is forecast for the second half of 2006. Chart courtesy of Mountaintop Economics & Research, Inc.

For the second straight month overall business activity for North American moldmakers registered moderate improvement. Based on the latest survey for our Mold Business Index (MBI), the MBI value for June was 51.7. This is a 0.2 percentage point increase from the May value of 51.5. Solid gains in the New Orders and Production components offset a decline in Backlogs. Once again there was a rise in Materials Prices, but Mold Prices held steady in the latest month. The Future Expectations component posted a reasonable 64.0 in June.

Our forecast calls for a continuation in this trend of gradual improvement in market demand for new molds through the remainder of this year and into the next. Global demand for molded products is expanding, and the capacity utilization rates for most sectors of the North American injection molding industry also are on the rise. These factors will spur increased capital investment for new injection molding machines and tooling for the next few quarters.

The sub-index for New Orders of molds was 58.0, which means that the amount of new business in June increased when compared with the previous month. Future gains in the total MBI depend on steady increases in new orders of molds. Production levels picked up substantially, as the latest Production sub-index was 60.0. Although the amount of new business has increased in recent weeks, the sharp rise in production levels also reduced the industry’s backlog, as the Backlog sub-index slipped to 42.0 in June.

The Mold Prices sub-index for June was 50.0. This means that overall prices for new molds held steady in the latest month. But the prices paid for some mold components increased, as the latest sub-index for Materials Prices was 58.0. The Future Expectations sub-index for June was 64.0. This is close to the same level as the previous month.

Barring a major supply disruption, we still believe that energy and materials costs will decrease gradually in the coming months. And we still expect that our Injection Molding Business Index (a measure of production levels for injection molders) will continue to expand during the next few quarters. This Index is forecast to register growth of at least 5 percent in 2006. Consistent gains in the Mold Business Index 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.