Psychologists could have a field day with first-quarter 2008 U.S. plastics machinery statistics. How you might choose to interpret them would reveal a lot about whether you are a pessimist or an optimist.
The pessimist: Injection press shipments for January through March this year dropped 26 units, or 3.9 percent, from the same period in 2007, when the full-year totals fell to a dismal 2,862 units, dipping below the 3,000 level for the first time in recent memory. During the late-1990s boom times, annual U.S. press shipments topped 6,000 units.
The optimist: Yeah, but the value of this year's shipments actually increased slightly, to $169 million from $166 million, and shipments also were up a bit from 2007's weak fourth quarter. The value increase implies that machinery makers shipped a greater number of more-expensive, larger presses, and possibly more all-electric machines, which tend to cost more than hydraulics, according to economist Bill Wood.
Wood, who heads his own firm called Mountaintop Economics & Research Inc. in Greenfield, Mass., crunches the raw machinery data collected by the Society of the Plastics Industry Inc.'s Committee on Equipment Statistics, and reports his findings at each annual SPI Machinery Division conference. His May 5 analysis at this year's gathering in Napa Valley suggests his wine glass is, tentatively at least, half full.
``I remain hopeful that this represents the absolute bottom,'' he said in an interview.
And while his hopes from last year for a speedy recovery largely have been dashed, Wood continues to find glimmers of brightness in some recently released economic indicators, such as national unemployment reports, gross domestic product growth and durable-goods shipments.
He also noted that U.S. plastics production capacity utilization in March 2008 was at 81.3 percent, according to Federal Reserve Board data. While significantly lower than the sustained utilization rate of 86-87 percent widely seen as necessary to stimulate industry growth, it's still much better than the sub-75 percent rate seen in late 2001.
Wood noted the vastly different set of circumstances between the current situation and the last full-blown recession, which began in 2001. Back then, the U.S. economy had been roaring ahead at a blistering pace when a chain of events, including the Sept. 11 terrorist attacks, caused the bottom to drop out. U.S. plastics machinery shipments plunged by more than half, and never really recovered.
``This is a different-shaped recession,'' he said. Without the big buildup preceding it, ``there is not as far to fall as before.''
Industry consolidation means there are fewer competitors in a leaner market, and the low value of the U.S. dollar, combined with rising costs in China, means the contentious issue of American manufacturers outsourcing to China for cheap production is not quite as big a factor as it used to be.
That said, he still cited trade information suggesting that for every shipping container the U.S. sends to China, China sends nine such containers back to the U.S., often with ``Wal-Mart'' stamped on the side. China annually buys more steel than the U.S., Japan and Germany combined, which is helping to drive up the cost of that commodity, further hammering U.S. makers of molds and machinery.
Referring back to the CES data from Washington-based SPI, Wood noted a strange phenomenon in which the fourth quarters in 2006 and 2007 were not the strongest quarters for injection machinery shipments. Historically, in nine out of 10 years the fourth quarter has been the most active of the year, as machine sellers aim to move presses to meet year-end sales goals, and buyers spend any available cash left in their coffers. Wood could not offer a good reason for the recent anomaly, but said it is highly unusual.
But back to our psychologist friend. The plastics machinery market consists of much more than injection molding machines. And the rest of the market presented a truly mixed bag.
The pessimist would note that 2008 first-quarter shipments of extrusion machinery slipped 14.2 percent from the year-ago period to 224, and the value of those sales also dipped, to $33 million from $38 million.
The optimist would have to strain hard to find a silver lining in the extrusion market, but at least could take heart that 2008's first quarter showed a modest improvement over 2007's final three months.
Auxiliary equipment makers - which report only sales bookings, not unit shipments - saw their sector remain basically flat early this year, logging about a $30,000 increase in bookings over 2007's first quarter.
As for machinery components, the SPI data shows a small first-quarter 2008 increase in extrusion component shipments compared with the 2007 first quarter. But that growth failed to offset a significant drop in injection molding component shipments. The result was an overall decline of 170 units, or 6.6 percent, to 3,836, according to the CES report. The quarter-on-quarter trend from late 2007 also was down, Wood said.
And finally, blow molding equipment makers shipped two more machines from January through March 2008 than in the same year-ago period, but the value of those shipments rose to $25 million from $15 million. The first quarter also exceeded the modest totals from last year's final three months. Still, the pessimist would note, that increase is from very a small base. There appears to be some disagreement about how the latest blow molding numbers were counted, and CES may revisit that data.
Wood admitted the overall economy today is much worse than he had predicted last year. Today's $120 barrel of oil and protracted subprime housing crisis would have qualified as a ``worst-case scenario'' a year ago. Still, the economist - perhaps not wanting to be responsible for any serious cases of suicidal depression among industry executives - tried to put the best face on a difficult situation. Again comparing with earlier this decade, he acknowledged that 2008's first quarter, while down overall from the previous year, is ``not nearly as bad as before.''
Time to break out the bubbly - or perhaps the Prozac - depending on your point of view.