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Troubled waters in third quarter.

Troubled Waters in Third Quarter

The plateau of the first two quarters of 1989 turned into a slump in the third, according to PLASTICS TECHNOLOGY's October survey of machine-capacity utilization among 438 custom processors. Average capacity utilization was down two points to 71%, the lowest since early 1987. The percentage of respondents (33%) reporting lower capacity utilization than the previous quarter exceeded the percentage reporting higher utilization (32%) for the first time since 1982. As recently as the second quarter, the increases outweighed the decreases by more than 3:2. This was also the first time in four years that the percentage of plants (14%) lengthening their workweeks was no greater than the percentage curtailing their workweeks.

While the percentage of favorable or optimistic comments on business conditions (56%) still outweighed negative or pessimistic ones (36%), the ratio was weaker than before, and many of those reporting improved conditions noted that business had been down until then. Others complained of customers stretching out payment periods, and several noted that even when volume of orders was satisfactory, margins had become distressingly thin.

As shown in the charts, three out of five custom processes declined somewhat in capacity utilization; injection molding dropped back below the 70% level for only the second time in six years. Only the highly packaging-related areas of custom extrusion and blow molding scored higher utilization rates in the third quarter.

The Northeast and West were weakest in third-quarter custom capacity utilization, while the South Central region again came out a winner.

TOOLING ORDERS SOFTEN

The 221 toolmaking shops in the survey reported a barely perceptible dip in dollar value of new tooling orders; in units, new orders were definitely down. This was also reflected in a sharp drop in toolmakers' capacity utilization, and a weaker ratio of the percentage of shops reporting longer lead (27%) times vs. shorter lead times (23%).
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Title Annotation:Manufacturing Activity Index
Publication:Plastics Technology
Date:Jan 1, 1990
Words:313
Previous Article:Materials.
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