Activity Levels: Rate of Decline Moderates

Business activity levels for North American moldmakers continued to drop in February, but the rate of decline clearly moderated when compared with January. The latest value for our Mold Business Index (MBI) was 48.3. This is a 2.3 percentage point increase from the January value of 46.0. Most of the components that comprise the MBI were flat-to-down when compared with the previous month.

The overall U.S. economy is holding up well despite the current cyclical downturn in the manufacturing and residential construction sectors. Energy prices have increased in recent weeks, but they remain in a longer-term pattern of decline. Inventory levels for most manufacturing segments continue to be drawn down, exports are increasing, and employment figures remain strong. It will take a few months for all of the macro-economic indicators to return to an “accelerating growth” phase of the business cycle, but we continue to forecast a noticeable improvement in business conditions during the second half of this year.

After a decline of 2 percent in 2006, our Injection Molding Business Index (a measure of production levels for injection molders) hit a cyclical bottom in the fourth quarter of 2006, and is now in the early stages of the next recovery phase. Our forecast calls for a solid gain of 5 percent in 2007. 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 lags the trend in the processing sector by about six months.

The sub-index for New Orders of molds was an even 50.0 in February, which means that the amount of new business was steady when compared with the previous month. Future gains in the total MBI depend on increases in new orders of molds. Production levels were slightly lower, as the latest Production sub-index was 47.9. The Employment component was also 47.9, which indicates that over-all payrolls were down a bit in recent weeks. The industry’s overall backlog shrank, as the Backlog sub-index registered 43.8 in February.

The Future Expectations sub-index for February was 54.2. This is down a bit from the previous month’s reading. However, there was a significant rise in the reported capital investment plans for mold builders.

February 2007
	% Positive	% Equal	% Negative	Net % Difference	Sub- Index
New Orders	33	34	33	0	50.0
Production	25	46	29	-4	47.9
Employment	13	70	17	-4	47.9
Backlog	29	29	42	-13	43.8
Export Orders	0	100	0	0	50.0
Supplier Deliveries	4	92	4	0	50.0
Materials Prices	21	79	0	21	60.4
Mold Prices	10	75	21	-17	41.7
Future Expectations	38	33	29	9	54.2
Total Mold Business Index for February 2007: 48.3. The total Mold Business Index is a weighted average of the sub-indices for new orders, production, employees, backlog, exports and supplier deliveries.