Hourly Rates Inch Up In 3rd Quarter
Most of the economic indicators in our latest quarterly survey suggest a strong business climate for custom injection molders. Machine-hour rates averaged 1.4% higher for the quarter, according to 78 plants responding to the survey. Not only did rates increase slightly in each of the first three quarters of 1999, but each quarterly increase was larger than the last. Many more respondents increased their hourly rates (11.5%) than decreased them (1.3%), though the overwhelming majority (87.2%) did not change them at all.
More molders increased their machine-capacity utilization (42.4%) in the third quarter than decreased it (23.5%), but the average capacity utilization dropped one and a half points to about 63.5%. Nonetheless, the proportion of respondents who said their capacity utilization was at least 75%--which approximates a "fully booked" condition--topped 41%.
Molders' optimism about near-term business conditions continued to strengthen. Almost 63% foresaw improving conditions, while only 16% expected worsening conditions, and 21% predicted no change. The optimists outnumbered the pessimists by almost 4:1. Optimism was unusually strong in the South Central region and particularly weak in the North Central (Great Lakes) area.
Tooling Starts Pick Up
After a very strong start in the first quarter, new tooling orders were flat in the second quarter. The latest survey shows new orders picking up again in the third quarter, with a 1.6% increase in the number of tools booked, according to 46 moldmakers across the country. Any increase in tooling activity is considered a positive leading indicator for future molding activity.