Molders Economic Index: For the next six months: Uncertainty rules

By: 
September 24, 1998

In our interviews with injection molders around the country, as well as major buyers of injection molded parts, we have been unable to obtain a clear consensus as to where the injection molding market is headed.


Projections differ sharply by market. Automotive molders, as a group, are somewhat glum and anticipate a further slowdown in orders. Molders of electronic parts see a strong end to 1998 but a weak start for 1999. Molders of products for the very strong housing market, appliances, medical parts, and packaging all appear rather bullish.


The different views do mirror the general sentiment in the economy where the impact of Asia's depression varies sharply by market as well. And the impact of the recently concluded lengthy GM strike will not be clear for some time.


One more factor has appeared in our interviews with molders, moldmakers, and parts buyers: the year 2000 issue. It appears that many producers-of all types of goods from small appliances to vacuum cleaners, cars and trucks to computers, telephones, almost everything-are working on finalizing designs for new products to be introduced in the year 2000.


Many companies have embraced 2000 as a marketing opportunity. The result is that products slated for introduction later this year or even next year have received little attention.


This explains, in part, the lackluster orders received by moldmakers who admit unusually high quoting levels for 2000. Simply put, whatever slump moldmakers and others may feel right now will most likely be replaced with feverish activity early in 1999.


Slower Economy

It has come as somewhat of a relief that a roaring economy has shown its first signs of a slowdown. What remains uncertain is just how much Asia's turmoil is to be blamed. What is certain, however, is that consumer demand has not decreased, and most sources anticipate strong consumer spending for the next six months. This, in turn, is good news for all consumer sectors served by injection molders.


Demand for American manufactured goods stagnated in June, hurt by slumping orders for aircraft and automobiles, according to the Commerce Department. The tiny .1 percent gain in overall orders failed to make up for a 2.2 percent drop in May, the sharpest in three years. Factory orders totaled a seasonally adjusted $330.5 billion in June, up from $330.2 billion.


Apart from transportation-hit hard by the GM strike (causing a slump of 6.9 percent for automotive parts) and slumping aircraft orders (down 21.6 percent)-other manufacturing orders increased 1.1 percent in June, following a 1.8 percent decrease the month before. Orders for computers and other office equipment jumped 7.0 percent and 1.6 percent for industrial machinery.


In July, GM sales dropped 38.0 percent, dragging industry-wide sales down 8.5 percent to 1.2 million cars and light trucks last month. That translates to a seasonally adjusted annual rate of 13.9 million vehicles.


Will GM be able to make up for lost sales? Will automotive molders be able to recapture the lost parts-molding business? The consensus appears to be that GM will not be able to make up for much of the production lost. Other suppliers such as Ford and Chrysler clearly benefitted from the strike, and importers of lower cost cars from Japan and Korea also saw sales jump.


For instance, in July, Nissan Motor Corp. reported car and light truck sales rose 10.0 percent while Mazda reported sales jumping 21.0 percent. Asia-based automaker's share of the U.S. vehicle market rose to 29.6 percent while European carmakers' reached 5.2 percent.


PC Market: A Good Outlook

Many molders have reported slower than hoped-for gains in new orders for the PC market and associated equipment such as laser printers, fax machines, and other such equipment for offices and homes. Part of the reason was a concerted effort by major PC makers to clear a very full inventory pipeline. Now, with inventories at a more reasonable level, computer makers are returning to full manufacturing, anticipating high sales of new models for the second part of the year and in connection with the all-important Christmas market.


PC shipments, which rose only about 7.0 percent in the second quarter, are expected to rise 12.0 percent for all of 1998. However, mostly due to Asia, global PC shipments rose a weak 7.0 percent in the second quarter, according to market research firm International Data Corp.


About the Index

This exclusive Molders Economic Index is a monthly service from IMM that tells you, at a glance, how your markets are doing and what the general outlook is. We cut through the flood of government and industry statistics and isolate those data that directly relate to your injection molding business.


This a record of production statistics that is indexed to the base period of July 1994 as 100 and is designed to give you a quick guide to industry conditions affecting your molding business.


The Molders Economic Index is prepared exclusively for IMM by Agostino von Hassell of The Repton Group, New York.

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