Increase in Employment Levels; New Orders Decline

Article From: MoldMaking Technology, from Mountaintop Economics & Research Inc.

Posted on: 12/1/2012

Total Mold Business Index for October 2012: 45.6


Total Mold Business Index for October 2012: 45.6

New orders for molds started to decline in the second quarter of this year, and there has been a gradual drop in new business ever since. The overall U.S. economy has expanded at a sub-par rate of just about 2% during the past two years, and this is not quite enough to generate consistent growth in the employment or household income data. Uncertainty about the ability of federal policymakers to perform their jobs in a competent manner has resulted in an attitude of “wait and see” for most businesses. Given these factors, it is not surprising that the trend in capital spending for new tooling and equipment is also struggling to stay positive. The fourth quarter of this year and the first quarter of 2013 will likely see a continuation of this sluggish growth, but things will improve noticeably if Congress gets its act together in the next few weeks. If Congress fails to solve the fiscal cliff and the debt ceiling problems, then the result will be an economic recession. Data source: Mountaintop Economics & Research, Inc.

For the fourth straight month, our survey shows overall activity levels declined with an MBI 45.6 for October 2012—a 1.2-point increase from September, but a 10.1-point decrease from October 2011.

A drop was reported in the important New Orders category for the sixth straight month. Yet despite this six-month erosion in new business, moldmakers are confident enough about the future to continue to hire new workers because there was another increase in Employment levels. Supply conditions are stabilizing as fewer respondents reported longer Supplier Delivery Times and higher Materials Prices when compared with the previous month. Mold Prices were again steady-to-firmer, though the gains in prices received for molds have still not caught up with the recent rise in the cost of materials. Future Expectations remain quite optimistic.

As the fourth quarter began, many of the major economic indicators in the U.S. started to gain some traction. The latest employment data blew past expectations while the recent trends in the residential construction and home price data gained upward momentum. All of this good news was tempered by the destruction of Hurricane Sandy, and also by the ongoing economic problems in Europe and the armed conflicts in the Middle East. And unless something is done quickly, the “fiscal cliff” problem will result in many Americans losing their jobs in a recession next year that will be directly caused by the inaction of our just re-hired legislators.

The New Orders component remained in a low range at 41.7. The trend of declining new orders over the past few months kept the sub-index for Backlogs down at 37.5. Production stayed in negative territory for the second straight month at 42.7. The only significantly positive factor in the latest survey was the Employment component, which came in at 55.2 this month.

The Mold Prices sub-index is 53.1. Mold prices are firmer, and this news is made even better by the fact that increases in prices paid for materials are decelerating. The sub-index for Materials Prices this month is 54.2. The Supplier Delivery Times component is 46.9. With demand for materials from moldmakers getting weaker this year, it is only logical that the supply conditions from their suppliers start to stabilize. There was little change in offshore orders, as the Export Orders sub-index is 51.0.

Once again by a wide margin, the most-cited problem confronting North American moldmakers in recent weeks is the shortage of skilled labor.


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