The Summer Doldrums: Just Wait, It Will Get Better

The recently released data from our June survey of MoldMaking Technology magazine subscribers confirms what many of us already knew: the overall North American moldmaking industry is just holding steady at the present time. The June value for our monthly MoldMaking Business Index was 50.1. This follows a value of 50.3 in May. For those of you not familiar with this index, it is a diffusion index based on 50.0 (similar to the well-known Purchasing Managers Index). A value above 50 indicates that business activity expanded when compared with the previous month, and a value below 50 means that business levels declined. The June value indicates that business levels were basically unchanged.

This story hasn't changed much since the beginning of the year. A year ago at this time business levels for moldmakers were improving. But then things slowed down in the second half of last year, and they have not gotten much better through the first half of this year. This trend in our index is corroborated by the trends in most of the data series that measure activity levels for the entire U.S. manufacturing sector and the overall U.S. economy.

In summary, the sluggish, but positive growth in the U.S. economy has been offset by slower demand for U.S. exports of manufactured goods. So here we are, just treading water.

On the domestic side, we are right now at the point in time when our economy will experience the maximum negative impact of the federal budget sequester. The effects of the sequester will persist for another two or three quarters, but the headwinds will gradually dissipate later this year. By this time next year, the economy will have fully adjusted and the negative effects of the sequester will be well behind us.

It will take longer than this for things to improve in the European economy, so export demand will remain sluggish. However, I am convinced that the American economy will be a strong engine for global economic growth for the foreseeable future.

So it's if we can just survive the next few months, then there is some good news in all of this. The fact that the moldmaking industry has held steady in the face of the current bout of economic headwinds is encouraging. It indicates that this industry is poised for more robust growth once the overall economy starts to gain momentum. Our forecast for overall GDP in the U.S. calls for another year of 2% growth in 2013 (the economy has averaged growth of right at 2% per year during the past three years). But next year, the growth rate will accelerate to something north of 3%, and we expect demand for new molds to rise accordingly.