Uncertain Outlook Clouds Forecast<BR><BR>

By: 
August 13, 1998

Injection moulders around the world were confident that the worst was behind them just five weeks ago. One moulder thought that the economic turmoil in Asia was to be replaced by steady growth in the second half of 1998 and that such key markets as Europe and Japan would grow even faster.



"Our long-term outlook was that we would see orders increase by more than 10 percent later this year," a Thai moulder wrote in e-mail. "Now we anticipate no growth for 1998 and maybe not even for 1999." Another moulder, this one a maker of appliance parts in Taiwan, said that growth projections for 1998 had been halved "because of reduced exports" to the various Asian countries. What changed? Most governments, central bankers, and economists now project that Asia's turmoil will be longer than anticipated. Why? China, late economic data show, is far weaker than projected and a devaluation of the Chinese currency -- something hotly denied by the regime in Beijing -- is seen as very possible.



Indonesia is in a free fall and economies once thought stabilized -- such as South Korea and Thailand -- are showing new signs of weakness. And the tensions in India and Pakistan carry the potential of further chilling the economy. Part of the reason for all this is that Japan's recovery is taking far more time than anticipated and that this key Asian powerhouse may remain slow for the balance of 1998. Europe, regardless of earlier forecasts for very solid growth, also may also reduce the export potential of moulders in Asia. This leaves a very strong North America where the economies of Canada, the United States, and Mexico continue to boom. "But that's not enough to pull everybody else along," says a source in Japan's Ministry of International Trade and Industry.



How to Project



With North America seemingly isolated from economic turmoil elsewhere, how should moulders in the rest of the world project growth in the second half of 1998? The country-by-country projections for growth in injection moulding found below, are based on the fact that injection moulding economic performance is directly linked to both the overall economy and exports.


These data are based on information obtained from the World Bank, several major private banking houses, and one German resin supplier. Some markets, of course, will show more growth than others. For instance, we believe that automotive moulders in Europe will have a better-than-anticipated year. And suppliers of injection moulded medical devices have seen no real change in new orders.



Highlights: Key Data



The following key highlights from around the world are what back up some of these projections:



Chinese Exports Are Down



The Asian financial crisis is taking a toll on China's exports, which slowed sharply in the first four months of this year. Exports grew a year-on-year 11.6 percent in the January to April period, down 15.3 percent from a year earlier. Exports in 1998 were forecast to grow by 7 to 10 percent, and imports to rise about 8 to 10 percent, said An Han, assistant minister of foreign trade and economic cooperation. Exports grew 20.9 percent in 1997, while imports edged up 2.5 percent. But the bad news may be about to begin. Exports this year were largely the result of orders placed last year, Han said. Overall growth in China's economy dropped to about 7.2 percent in the first quarter, well below anticipated rates.



Japan's PC Sales



A detailed review of PC sales data from Japan shows a trend that is replicated elsewhere and has a direct impact on what electronics moulders do -- this is a shift to notebook computers as well as a shift toward low-cost desktops. Japan's domestic personal computer shipments took the first fall in five years in fiscal 1997 -- which ended 31 March -- sliding 5 percent from a year earlier to 6,851,000 units, the Japan Electronic Industry Development Association says. In fiscal 1997, shipments of desktop PCs fell 17 percent, but those of notebook PCs grew 18 percent to grab a record 44 percent share in the PC market.



The association projects that PC shipments in fiscal 1998 will increase 5 percent to 7.2 million units, citing demand expected from the introduction of Windows 98 and cut-price PCs. The association also reported PC exports fell 10 percent in fiscal 1997 to 1,323,000 units, with their value down 19 percent.



Global Computer Market Shift



Above data for Japan are part of a global shift in the PC product mix resulting in massive cost pressures of components suppliers as well as a booming market for those moulders equipped to handle the higher demands of notebook computers. PCs under US$ 1,000 will account for 25 percent of global desktop PC unit shipments by 2001, expanding rapidly from their 1997 standing of 12 percent, according to recently completed research from International Data Corporation, Framingham, Massachusetts, USA. "Increased pressure on component manufacturers to reduce cost and continued market share consolidation among the top PC vendors will accelerate the shift among commercial and consumer buyers alike over the next few years," the report states. "While some PC companies and component vendors are eagerly leading the charge to lower price points, vendors with less efficient practices or misaligned strategies will be faced with significant sales and financial repercussions."



Taiwan Weak?



The seemingly unaffected Taiwanese economy now appears to be feeling some of the pain from the Asian flu. Taiwan's first-quarter economic growth slowed significantly as Asia's currency crisis ate sharply into exports. Taiwan's gross domestic product will have risen only 5.43 percent year-on-year in the first quarter -- well below the 7.08 percent pace reported in the fourth quarter. In the first three months, Taiwan exports fell 6.4 percent compared to the first quarter of 1997, resulting in Taiwan's first first-quarter trade deficit since 1981.



Explanation of the DataCOLOR>


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.

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