1st Quarter Indicators Portend Continued Growth for New Molds

A wise economist once said, “Predictions are difficult to make, especially about the future.” But as any shop owner/manager knows, it is impossible to run a business without them. And since there is an acute shortage of reliable prophets (and also profits?) these days, the rest of us are left to analyze the recent trends in the plastics industry indicators if we are to glean some morsel of insight about future business levels for moldmakers. Fortunately, the trends in the industry’s indicators during the first quarter of this year provide evidence that the recent trend of moderate growth will continue for at least the next few months.

Many of the readers of this blog are familiar with our Mold Business Index. This Index is based on a monthly survey of North American moldmakers, and the results are published as a monthly column in Moldmaking Technology magazine. The MBI indicates that demand for new, domestically-produced molds has been rising gradually for most of the past two years. Demand sank pretty low prior to the start of this trend, so the industry is far from completely healed. But it has been moving in the right direction in recent quarters, and the trend from the first quarter of this year suggest that this pace of moderate, steady growth will continue through 2012.

There are other data that support this forecast. The Federal Reserve Board compiles and reports data on the volume of plastics products that are manufactured in the U.S each month. According to this data, the total output of plastics products in the U.S. grew by more than 6% in the first quarter of 2012 when compared with the same period from a year earlier. And it escalated by more than 8% for the year in 2011. Our research shows that demand for new molds rises when the production of plastics parts grows by a rate of at least 4% for a sustained period of time. So the trend in output of plastics products clearly supports demand for new molds, now we just need to convert more of this rising demand into business for North American moldmakers.

Other indicators that should be received as welcome news to moldmakers are the recent trends in demand for both new injection molding machines and also new screws and barrels for injection molding machines. These data are not made public, but recent news releases generated by the NPE 2012 show down in Orlando reveal that the demand for new injection molding equipment has been quite robust for at least the past year. This is largely due to the resurgence in the American automobile industry, and it means that companies have money to invest in new equipment and new tooling.

It goes without saying that the recovery in the U.S. economy is not yet firing on all cylinders. A sluggish construction sector combined with high energy costs, high unemployment levels, and anxiety caused by congressional gridlock will keep this country from experiencing more rapid economic growth for at least another year. But the manufacturing sector has been a bright spot for the past two years, and this will likely continue for the foreseeable future. But given that predictions are difficult, you will be well-advised to monitor the indicators closely and continuously along with us in the event there is any change in the outlook.