Our MoldMaking Business Index stayed very close to the 50-line through the first half of 2012. The growth rate in the overall U.S. GDP data during this period was an anemic 1%. It will take a faster rate of economic growth than 1-2% to generate an increase in spending for capital equipment, which will in turn create demand for new molds and tooling. The good news is that despite the sluggish growth in the overall economy, demand for new molds has held steady. This suggests that the mold industry is poised for robust growth once the overall economy can generate some sustained upward momentum. This will most likely happen next year. The residential construction sector has finally entered a full-fledged recovery, and the nation’s employment figures are starting to improve steadily. Both of these trends will push household incomes higher, and after a few months this will result in increased consumer spending. We expect economic growth to register a gain of 2% in 2012, and it will accelerate to greater than 3% in 2013.
Our latest survey of the North American moldmaking industry indicates that overall activity levels held steady in June when compared with the previous month. The MoldMaking Business Index for June 2013 is 50.. The latest index value is a 0.2-point decrease from the May value of 50.3, and it is a 5.4-point decrease from the 55.5 value posted in June 2012.
Though our total Index slipped when compared with the previous month, some of the underlying indicators suggest that conditions were actually just a bit better. And the fact that the overall index has held steady throughout the entire first half of this year is quite encouraging. We are right now at the point in time when the negative effects of the federal budget sequester and the increase in the payroll taxes will have the maximum impact on the economy.
In the second half of this year, the effects of these events will start to decrease. So the fact that the moldmaking industry is holding steady in the face of significant headwinds in the prevailing economic conditions suggests that this industry will expand rapidly once the overall economy starts to gain some upward momentum.
The New Orders component registered a surprisingly good 53.3 in the latest month, which means that the level of new business was moderately better when compared with the previous month. The Production sub-index of 52.9 indicates that work levels also increased when compared with the previous month. The respondents to our survey continue to report that backlogs are getting shorter, but they are doing so at a slower pace. The Backlogs sub-index crept up to 43.8 in June. The Employment component was 53.8, which means that payrolls were higher for the sixth straight month, and the rate of expansion is holding steady.
The prices received in the moldmaking sector actually strengthened in June. The Prices Received sub-index for the month was 51.7. The upward momentum in the sub-index for Materials Prices continued abated somewhat in the second quarter, as the Materials Prices sub-index came in at 63.7. So materials prices continue to rise, but the rate of the gains are moderating. Supplier Delivery Times continue to get just a tad longer, as this component posted a 52.5 in June. Offshore orders extended their downward trend to 12 months. The Exports sub-index was 44.0.
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