Overall business conditions for mold makers are moderately good at the present time, and my forecast calls for these conditions to continue through at least the end of 2017.
This outlook is based on the assumption that the growth rate for the U.S. economy will stay close to 2 percent in 2017, which is just about the same rate of growth the economy has exhibited for the past six years.
To review the relevant trends: household incomes are rising at an accelerating pace; home prices are gradually increasing; interest rates, inflation and energy prices are low; and the stock market is trading near its all-time high. All of these trends are well-established, and all of them portend further improvement in business conditions for molders and their suppliers.
I have recently heard the current state of the economy described as “treading water” or “moving sideways.” These are inaccurate.
These descriptions mean no growth, and that is not the current situation. The rate of growth in the U.S. economy is not as fast as we would like, but it is growing steadily. It is certainly not “a disaster” as one of the candidates for president calls it. This kind of inaccuracy creates uncertainty, and such uncertainty might be politically expedient. But it is most certainly one of the biggest impediments to even greater investment in capital goods like new molds.
So what does the data tell us? Take a look at the trends in corporate profits for a couple of important end markets for molded products. In these two industries the trend is steadily upward. The pace of expansion in the United States is not fast, but it is steady and reliable. Good managers can find a way to make money in these conditions, and that is what's happening in some of the biggest end markets for molds and tooling.
Last year set the all-time record for light vehicle sales in the United States, and the year-to-date total for 2016 is running slightly ahead last year. The fourth quarter was particularly strong in 2015, so I don't expect another record this year. But it will be very close. That will make two outstanding years in a row for vehicle sales, and we have the profit data to match.
For 2017, I believe that we will be past the peak in demand for motor vehicles, but the annual total will not decline by a lot. Market demand will stay at very high levels for the next year. This means that corporate profits for the motor vehicle industry will stay strong. Profit is what drives spending for capital equipment, and this most certainly includes spending for new molds and tooling. As long as automakers are making money they will continue to develop new products that require high levels of injection molded parts.