Future Expectations Jump

The Mold Business Index (MBI) for January 2010 is 40.2. This is a 5.6-point decrease from the previous month’s value of 45.8, and it is a 1.9-point decrease from the MBI value of 42.1 from January of last year. January is historically not a strong month for our MBI, and this year is no different. This latest data indicate that virtually all segments of business activity for North American moldmakers declined at the start of this year. The downward trend in Mold Prices appeared to stabilize in January, and the rate of increase for Materials Prices moderated. This slow start to 2010 notwithstanding, Future Expectations jumped up to 79.4 in January.

The decline in moldmaking activity was a contrast to the improvement registered in most of the other economic and industrial indicators from January. Auto sales in January remained sluggish by historical standards, but the number of new cars sold last month was substantially higher than the low-point hit a year ago. The problems associated with a massive recall by the global giant Toyota have most recently dominated the news. But aside from this, there has been a marked shift in the underlying news and marketing campaigns for the auto industry.

Worries about corporate profits, layoffs, executive salaries, and market share are subsiding, and ideas pertaining to safety, energy consumption, and utility are emerging. In short, companies that supply transportation and consumers that want to be transported are starting to communicate about cars. This process is still in its early stages, but it is a sure sign of the pending market and economic recovery. And it is everybody’s best hope that the North American manufacturing sector will reclaim its status as a viable and healthy driver of economic growth. It may take some time, but the market will correct its own problems if we let it.

As for our own MBI, the number of New Orders for molds declined for the fourth straight month in January. This sub-index is 32.4. Production activity also declined again, as the latest Production sub-index is 44.1. The Employment component is 38.2 indicating that there was a decline in overall payrolls in January. Backlogs diminished in the latest month, as the Backlog component is 35.3 for January.

The Mold Prices sub-index for January is exactly 50.0. This suggests that the pressure from customers to lower the price of new molds is moderating. The prices paid for materials are yet again steady-to-higher, as the latest sub-index for Materials Prices is 52.9. Supplier Delivery Times were unchanged, as this sub-index posted a value of 50.0. There was a decrease in the number of offshore orders for new molds, as the Export Orders sub-index is 41.2.

The most-cited problem confronting North American moldmakers in recent weeks is getting paid on a timely basis for work completed. Other problems receiving multiple mentions were: low prices paid for molds as a result of overcapacity in the mold industry; and the credit crunch.

Our Injection Molding Business Index (a measure of production levels for injection molders) increased in the fourth quarter of 2009 when compared with the previous year. This Index is expected to recover gradually throughout 2010. The latest forecast calls for a gain of 7% in the coming 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 mold making 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.

December 2009
	% Positive	% Equal	% Negative	Net % Difference	Sub- Index
New Orders	11	45	44	-33	32.4
Production	28	39	33	-5	44.1
Employment	22	61	17	5	38.2
Backlog	22	50	28	-6	35.3
Export Orders	0	94	6	-6	41.2
Supplier Deliveries	6	83	11	-5	50.0
Materials Prices	6	94	0	6	52.9
Mold Prices	6	61	33	-27	50.0
Future Expectations	44	39	17	27	79.4

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