Aerospace and Medical

Aerospace Growing Significantly in 2015
Virtually every metric I track for the aerospace industry is pointing toward strong mold production and consumption in 2015.

Real disposable income is growing at its fastest annual rate in two years and is closing in on its fastest rate of growth in almost eight years, or pre-financial collapse. In fact, the month-over-month growth rate in disposable income is higher the historical average for the first time since March 2011 (excluding October through December, which were artificially inflated due to changes in tax laws). The rapidly accelerating growth in disposable income has led to accelerating growth in both system revenue passenger miles, which are growing at their fastest rate in nearly four years, and consumer spending on air travel, which is growing at virtually its fastest rate in a decade. These two metrics are important leading indicators for aerospace industrial production.

The chart shows the correlation between system revenue passenger miles and aerospace industrial production. Changes in the former tend to lead changes in the latter by about 12 months, on average. Passenger miles have been steadily accelerating since early 2013, and this indicates that aerospace production should see more accelerating growth in 2015. In addition, capacity utilization at aerospace manufacturers has been growing significantly. Both of these trends are a good indication that mold use and consumption in the aerospace industry will increase this year.

Business conditions in the aerospace industry have been trending up since last August, and the industry is growing at virtually its fastest rate since September 2012. New orders and production have increased dramatically in recent months.

Medical Growing at Fastest Rate in 8 Years
While the medical device industry is virtually recession-proof and almost never contracts, production has been roaring since March 2014. Device production has a pretty clear two-year cycle (see the chart), and at the beginning of 2014, it appeared it was entering its down phase. That normal two-year cycle seems to have been aborted, however, due to the rollout of the Affordable Care Act (ACA).

With the enactment of the ACA, medical care spending began growing at an accelerating rate, and that trend has not stopped. As a result of the increased spending (and perhaps hoped-for, even-more-dramatic future increases), medical device production took off in early 2014, and it is now growing at its fastest rate in nearly eight years. But I wonder if the current period is similar to the early 1990s and the attempt at health care reform that took place then. At that time, medical device production was growing much faster than medical care spending. As a result, production ended up crashing. The medical industry could be facing a similar situation today, as the gap between medical device production and medical care spending is similar to what it was 20 years ago. In fact, the two periods seem eerily similar from a data perspective.