Forecast for Recovery Remains Unchanged

The Mold Business Index (MBI) for June 2010 is 45.1. This is a 3.2-point decrease from the May value of 48.3, and it is a 7.5-point decrease from the MBI value of 52.6 registered in June of last year. This month's MBI data are consistent with the measurable deceleration in the overall economic growth that occurred at the end of the second quarter, but our forecast of a gradual recovery in the mold industry, and the U.S. economy, during the second half of 2010 remains unchanged. Mold Prices remain under pressure, and Materials Prices continue to rise. The Future Expectations sub-index this month indicates that moldmakers' attitudes about future business levels remain upbeat.

Several of the important macroeconomic indicators have stumbled in recent weeks. These include: a disappointing employment report from June; a decline in total home sales; a decelerating rate of growth in demand for manufactured goods; and a persistently low level of consumer confidence. This sputtering has heightened fears that the current economic recovery is unraveling. Though we expected the labor and housing markets to pull back this summer as the federal homebuyer tax credit expired and the temporary census jobs were removed from payrolls, now that we are actually experiencing it, things seem more tenuous.

But despite these recent bumps in the recovery, we still expect economic growth to remain positive for the remainder of 2010, and it will accelerate in 2011 and 2012. This forecast is based on a number of prevailing conditions. Corporate profits are robust, personal income is rising, and business confidence continues to trend higher. Demand for manufactured goods has cooled a bit for many sectors, but it remains well above levels from a year ago and should continue to expand. The ISM manufacturing index (a.k.a. the Purchasing Managers' Index) declined by 3.5 points to 56.2 in June, but it remained comfortably above the expansion threshold of 50.

Unfortunately, the pace and duration of the overall economic recovery during the past year has not yet reached the level required to drive demand for new molds and tooling. The New Orders component for our MBI in June indicates a decline in new projects for the ninth consecutive month. This sub-index for June is 34.1. Production activity was mostly steady, as the latest Production sub-index is 47.7. The Employment component is 52.3 indicating that there was little change in overall payrolls last month. Fewer new orders combined with steady production levels resulted in another decrease in backlogs, as the Backlog component is 36.4 for June.

The Mold Prices sub-index for June is 40.9, and this indicates that pressure from customers to lower the prices paid for new molds remains intense. The prices paid for materials continue to escalate, as the latest sub-index for Materials Prices is 61.4. Supplier Delivery Times were steady-to-slower, as this sub-index posted a value of 45.5. There was a small uptick reported in the number of offshore orders for new molds, as the Export Orders sub-index is 54.5.

The most-cited problem confronting North American moldmakers in recent weeks was finding and keeping skilled employees. Other problems receiving multiple mentions were: getting paid in a timely manner; price pressures; customers not understanding the value of high-quality tooling; the sluggish economy; and the credit crunch.

Our Injection Molding Business Index (a measure of production levels for injection molders) posted another solid increase in the second quarter of 2010 when compared with the previous year. This Index is expected to register positive growth momentum throughout 2010. The latest forecast calls for a gain of 8% this year. The total amount of injection molded goods produced was flat-to-slightly-higher in 2009 when compared with the previous year. Consistent gains in the Mold Business Index depend on sustained growth of 4% to 5% 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 Mold Business Index is based on a monthly survey of North American moldmakers. Mountaintop Economics & Research, Inc. conducts the survey, and then calculates a diffusion index based on 50.0. A value above 50.0 for the MBI indicates that business activity expanded in the previous month, while a value below 50.0 means that business levels declined.

JUNE 2010
	% Positive	% Equal	% Negative	Net % Difference	Sub- Index
New Orders	27	14	59	-32	34.1
Production	27	41	32	-5	47.7
Employment	9	86	5	4	52.3
Backlog	23	27	50	-27	36.4
Export Orders	9	91	0	9	54.5
Supplier Deliveries	9	73	18	-9	45.5
Materials Prices	23	77	0	23	61.4
Mold Prices	9	64	27	-18	40.9
Future Expectations	36	59	5	31	65.9

The total Mold Business Index is a weighted average of the sub-indices for new orders, production, employees, backlog, exports and supplier deliveries.