The growth rate in the U.S. economy has gradually improved through the first two months of this year, and this is corroborated by the recent trend in our MoldMaking Business Index. The underlying fundamentals of the U.S. economy continue to strengthen. The residential construction and real estate sectors are entering a full-recovery mode, and this is pushing up house prices and household wealth. The stock market recently hit an all-time high, and this too is generating more household wealth. The Federal Reserve Board is keeping interest rates extremely low, thus providing an incentive for companies and investors to take more risk. Low interest rates combined with rising wealth in the consumer sector and solid profit levels in the business sector are the ingredients required for a surge in the employment data. All that is missing is confidence. The recent sequestration debacle in Washington has dampened enthusiasm in recent weeks, but the negative effects of this should wear off by the second half of this year. Therefore, we expect economic activity to chug along at the current rate of growth for another quarter or two, and then accelerate at the end of this year and through 2014.
Rebounding from a three-month downtrend, our survey of the North American moldmaking industry indicates that overall activity levels increased in February. The MoldMaking Business Index for February 2013 is 51.3 (a value greater than 50.0 indicates an increase in business levels for the month). The latest index value is a 1.5-point increase from the January value of 49.8, but it is a 7.2-point decrease from the 58.5 registered in February 2012.
A rise was reported in the crucial New Orders category for the second straight month, and the Production category also registered a second consecutive increase. Supply conditions, as measured by the Supplier Delivery Times and Materials Prices components, were again the most notable negative factors in the index this month. Supplier delivery times continue to get longer, and materials prices have increased for 15 months. Prices Received remained steady-to-firmer, though the trend in prices received are not keeping pace with the gains in costs for materials. Future Expectations were substantially more optimistic.
The New Orders component posted an encouraging 53.7 in the latest month. The gains in orders so far this year are notable given all of the uncertainty generated by the policymakers in Washington in recent weeks. This gain in new orders meant that the recent slide in Backlogs continued to decelerate. The Backlog sub-index is 46.3 for February. The Production sub-index of 54.1 continued to gain momentum from the previous month. The Employment component is 52.9, which means that payrolls were higher this month.
The prices received in the moldmaking sector gradually strengthened for the second straight month. The Prices Received sub-index for January is 52.9. The sub-index for Materials Prices spiked up this month to 73.9. Supplier Delivery Times are getting longer, and this component escalated to 53.3 in February. Offshore orders extended their downward trend last month, but the pace of decline slowed in recent weeks. The Exports sub-index is 47.7.
The MoldMaking Business Index is based on a monthly survey of subscribers to MoldMaking Technology magazine. Using the data from this survey, Gardner Research calculates a diffusion index based on 50.0. A value above 50.0 for the index indicates that business activity expanded when compared with the previous month, and a value below 50.0 means that business levels declined.
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