Do not believe it is an overstatement to say mold makers have been on the front lines of a trade war with China for nearly 20 years. And it may take another 20 years to understand fully all the damage to this sector — and this country — as a result of this war. But no matter how well-intentioned or justified a trade war might be, or how well it may eventually work out in the long term, it can be costly in the near term. The U.S. manufacturing sector is currently in a period of modest contraction, and the recent uncertainty about the future trend in global trade is widely considered to be one of the reasons for the recent decline in U.S. manufacturing activity. And in case you missed it, that is the very definition of "irony." There is no reliable, high-frequency source of data measuring activity levels for North American mold makers, but from unscientific research indicates this industry has also been in a contraction phase for the past year or so. Demand for molds can be extremely volatile, but even moderate swings in the overall totals can represent huge hardships for some shops. Mold makers constitute a very small segment of the capital equipment sector, and the trend in spending for capital equipment —often abbreviated as "CAPEX" — has a significant impact on the trend in demand for new molds and tooling. Preliminary data indicates spending for capital equipment in the third quarter of 2019 was moderately positive when compared with a year ago, but the rate of growth was decelerating. So, what does this mean for 2020? According to the latest report, the Capex Plans Index declined modestly in September. The index has declined for most of the past two years after hitting a peak late in 2017, and this downtrend corroborates the gradual decrease during this period in the rate of change curve for investment in industrial equipment. But the rate of decline in the Capex Plans Index is decelerating. This flattening of the downward slope typically occurs near the cyclical low-point. It is worth noting that three of the five Federal Reserve Districts that make up the overall index reported increases in the aggregate capex plans for their regions in September. These increases were mitigated by declines in two of the heavier-weighted districts, but this could still be an indication investment plans are stabilizing. Based on the latest data, can current forecast is for a gain of 1-2 percent in investment in industrial equipment in 2019, followed by a similar gain of 1-2 percent in 2020. The current downtrend is occurring at a time when interest rates are very low, employment levels are high and household incomes are rising. This means U.S. consumers should continue to spend, and this should keep the U.S. economy out of a recession for the foreseeable future. If this is the case, then the short-term outlook for mold makers is favorable — not great, but not calamitous either. Reference: plasticsnews.com
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