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Hourly rates flip-flop in 1st quarter.

After sagging for two successive quarters in 1991, custom injection molders' machine-hour rates briefly perked up in the fourth quarter and dropped back down again in the first quarter of 1992. But the stage appeared to be set for them to rise again by mid-year. According to returns from 195 custom molders around the country (an unusually large response to our latest quarterly survey), hourly rates slumped 7-8% in the first quarter, after rising 11-12% in the fourth quarter of '91. That leaves average rates 2-3% below their levels in the first quarter of '91.

A PARADOX EXPLAINED?

The apparent paradox of a fourth-quarter rise in hourly rates when business was terrible, which we reported in April (p. 113), now may have an explanation. In January (p. 83), we first noted the observable TABULAR DATA OMITTED correlation between the historical rise and fall of both hourly rates and injection machine capacity utilization, derived from PLASTICS TECHNOLOGY's quarterly surveys since 1988. Until recently, it appeared that hourly rates tended to follow changes in capacity utilization by about six months. More recently, that lag shrank to three months. It looks as if custom processors, impatient with the lingering recession, leaped at the brief upturn in business in the third quarter as a sign of the long-awaited turnaround and raised their prices in the quarter immediately following. That turned out to be premature as capacity utilization plummeted in the fourth quarter, and molders promptly cut back their hourly rates again in the first quarter of '92. But capacity utilization revived again in the first quarter, so hourly rates may have followed in the second quarter.

It's interesting to note that hourly rates dropped in the first quarter only for machines of less than 750 tons. Rates for larger presses actually increased substantially.

The first-quarter overall decline in rates was also not uniform across the country. The Southeast was the one region to show an increase in average machine-hour rates for the quarter.
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Copyright 1992, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:Injection Molding; injection molders' machine-hour rates
Publication:Plastics Technology
Date:Jul 1, 1992
Words:329
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