Cycle to Hit Bottom in the First Half of 2009

The Mold Business Index (MBI) for December is 38.6. This is a 3.9-percentage point decrease from the November value of 42.5. The sub-index for New Orders of molds was 31.6 in December, indicating that new business levels declined at a faster rate when compared with the previous month.

The sustained drop in New Orders in recent months has all but eliminated the industry’s backlogs, as the Backlog component was a record-low 18.4 in December. The prices paid for steel and resins have declined recently, and we expect the downtrend in the Materials Prices component to continue for the next few months. Unfortunately, the Mold Prices sub-index for the latest month was 36.8 indicating that the prices paid for molds were lower yet again. The Future Expectations component leveled off at exactly 50.0.

The U.S. economy contracted at an accelerating rate in the fourth quarter of 2008, and this was reflected in the latest data from our MBI survey. About the only good news is that supplier delivery times and the prices paid for energy products and materials also declined. Economic growth in the U.S. will be negative for at least the first half of 2009, and the growth in the second half of the year will be moderate at best. This means that the fundamentals for moldmakers and many other durable goods industries—such as automobiles and appliances—will not improve substantially until the fourth quarter of 2009 or early 2010.

The shortage of qualified people entering the industry was once again the top response to the question of the biggest problem confronting North American moldmakers. But for the first time in our survey, “employee morale” was listed as a big problem. Others receiving multiple mentions were: the recession; suppressed profits due to lower prices paid for molds; and no backlog of work.

According to our Injection Molding Business Index, production levels for injection molders plummeted 20 percent in the fourth quarter of 2008 when compared with the previous year. This followed a drop of 16 percent in the third quarter. For 2008 as a whole, this Index declined by 15 percent. The downtrend in production of injection molded products is forecast to continue through the first and second quarters of 2009.

December 2008
	% Positive	% Equal	% Negative	Net % Difference	Sub- Index
New Orders	16	31	53	-37	31.6
Production	16	31	53	-37	31.6
Employment	16	68	16	0	50.0
Backlog	5	27	68	-63	18.4
Export Orders	0	95	5	-5	47.4
Supplier Deliveries	11	84	5	6	52.6
Materials Prices	11	78	11	0	50.0
Mold Prices	5	63	32	-27	36.8
Future Expectations	32	36	32	0	50.0