More Declines Seen for Asia—Slower Growth for the U.S., E.U.

The Asian Flu is far from over and remains a highly infectious disease. Plastics injection moulders in Asia are likely to see continuing declines in their output as the overall economies in that region are continuing to contract. The most frequently found words in any Asian economic reports these days are "government experts revised future growth prospects downward . . . ." Such a projection came in late July from Indonesia, Thailand, Malaysia, South Korea, Japan, Australia, India, and China.

Most troubling is that few predict any immediate recovery for these battered economies. Unlike the Mexican rescue of a few years ago, there will be no quick turnabout in Asia. It will take three to four years, at least, for the region to recover.

Asian economies account for about one third of the world's economy. Any continuing recession and possibly even a depression--in countries such as Indonesia--could severely impact the profitability of exporters in Europe and North America.

Much of this stems from mounting concern over just what the new leadership in Japan may do to reform that country's shaky economy and resume its function as the economic locomotive for Asia. Initial reactions to the new leaders in Japan are mixed at best.

Both Europe and North America remain stable, sticking to overall annualized growth of about 2.9 percent on average. Very strong domestic markets have helped these strong economies ride out any impact of Asia for now. The forecast in Europe and in North America: slower growth for the balance of 1998 and possibly a downturn of sorts in late 1999.

Slower Growth Seen

A midyear United Nations survey released in late July forecast that the crisis in Asia would significantly cut the pace of global economic growth. This U.N. World Economic and Social Survey said that "The economic shock waves set off by a 1997 run on East Asian currencies . . . will slow world growth to an estimated 2.5 percent in 1998, after two straight years of better than 3 percent growth." The survey's 1998 growth forecast for industrialized economies was 2.25 percent compared with a decade-high 2.7 percent in 1997. Growth in developing countries might not exceed 3 percent compared with an average 5 percent or more in five of the past six years.

Japan's Economic Impact

The sharp downturn in Japan will not only slow Asia's recovery, but also poses serious risks to the U.S. economy, including the possibility of a recession next year. In late July, the research arm of Standard & Poor put the odds of a U.S. recession in 1999 at 1-in-3 because of the deepening Asian economic crisis. "Asia is the big risk for the U.S. economy over the next year, the one thing that could bring a recession here," a source says.

Japan's industrial output dropped a steep 2 percent this past May. Japanese government sources said that this fourth consecutive monthly decline was mainly attributed to very high inventories as well as weak production of general machinery and passenger and railway cars.

Other News

What This Means for Moulders

While much of the economic news reported here is bleak, moulders in Asia in particular are reporting somewhat better prospects. E-mail communications to us as well as a somewhat unscientific polling show that moulders in Asia often see higher export orders now that have cushioned their businesses from a free-fall.

This applies primarily to moulders of components for cars and trucks, computers, household appliances, and toys. There, state moulders in such countries as Indonesia, Thailand, Malaysia, and Singapore, export orders have compensated somewhat for sharp declines in domestic orders. The weakened Asian currencies have resulted in Asian plastics parts being far more competitive than ever and are thus attracting new buyers in Europe and North America. While it will take several more months before the true trade picture will be known, it is reasonable to assume that once all data for 1998 are in, plastics moulded parts exports from Asia will show an average increase of 10 percent.

Moulders in such important markets as automotive, appliances, electronic, and packaging in Europe and North America are reporting solid growth fueled by strong car sales and a continued boom in consumer spending. The GM strike in the United States has negatively impacted numerous North American moulders but is unlikely to have an extended negative effect.

EXPLANATION OF THE DATA

The following key factors are considered in analyzing the global injection moulding economies.

Values: All data are expressed in either percentage or US$ figures in billions. Many of the US$ values were converted from the currency of the country covered. The exchange rate used between the US$ and individual currencies is provided.
Inflation Rate: This gauge allows for a better interpretation of all other economic measurements. Key economic indicators are not adjusted for inflation in most countries. Data are expressed on an annual basis and will be adjusted as new data are obtained.
Gross Domestic Product (GDP): Change in percentage over the last 12 months. GDP measures the actual output of all goods and services in a nation.
Industrial Production: This gauge measures actual increases in the output of all manufacturing establishments in a country. It is essentially the industrial portion of the GDP.
Export of Manufactured Goods: Change over the last 12 months and change since last month. Most recent total volume is provided in some cases.
Import of Manufactured Goods: Change in percentage over the last 12 months and since last month.
Trade Balance/US$ Billion: A positive $ number indicates a country is running an overall trade surplus. a negative $ number indicates that a country is running a trade deficit. Percentage figures for either last month or the last 12 months indicate any change in the size of the trade surplus/deficit.
Domestic Production of Transportation and Parts: This gauge measures increases or decreases during a one-year period in the output of all transportation-related products including completed cars and trucks. It is based on such numerous data sources as trade data in car parts, actual car manufacturing data, and similar resources. Data are estimated for most countries, based on other data.
Computers and Electronics: These data measure increases or decreases in the output of computers and computer parts, such related equipment as printers and copiers, and such electronic devices as radios, televisions, and telephones. Data are estimates for most countries.
Plastics Processing Production Volume: This gauge measures the overall increase of a value basis in the output of all plastics processing plants in a country. It measures all plastics processes. Data used to develop this measure include resin sales and imports, machinery sales, actual data on processing output (available only on a limited basis), computers, and individual reports.
Output Growth in Injection Moulding on a US$ Value Basis: Developed by IMI, this analyzes all data reported here and other available data. This gauge measures the most likely increase/decrease in US$ value output of injection moulding plants. A key factor used in the calculation is a mechanism first developed for IMI's sister publication, Injection Molding Magazine.