Manufacturers Scramble to Move Products : Economy: Purchasing managers are worried about being stuck with inventory in a declining market, a Chapman College survey indicates.

Manufacturers in Orange County are preparing for an economic slump by scrambling to get their products out the factory door as fast as they can, a new survey indicates.

The survey suggests that manufacturers’ confidence in the economy during the third quarter posted its biggest decline in three years. The Orange County Purchasing Managers index, released Monday, fell more than seven points in the July-September period to 50.1 from 57.5. in the second quarter.

The survey and its composite index--compiled by the Chapman College Center for Economic Research--are modeled on a national survey and measure anticipated growth in the manufacturing segment of the county’s economy. Measures above 50 points indicate growth, while those below 50 indicate decline.

The index, begun in the first quarter of 1988, peaked at 67.4 in the second quarter of that year and has been inching downward ever since.

In the national survey, conducted by the National Assn. of Purchasing Managers, the index of economic confidence fell to 46.3 in the third quarter, down from 50.7 in the second quarter.

Raymond Sfeir, the Chapman College economist who conducts the local survey, said the third-quarter findings showed “inventories are way down, which means manufacturers are holding less and less inventory.”

Many purchasing managers included in the survey said they are worried about being caught with inventory in a declining market, Sfeir said.

At the same time, the study showed that production remains brisk, with 42% of the respondents saying they are working at greater capacity than in the second quarter. Nationally, production levels have dropped for two consecutive quarters, Sfeir said.

While respondents were not asked why their companies were increasing production, Sfeir said the findings usually indicate that manufacturers are trying to use up raw materials and ship goods before the economy worsens.

He said that is underscored by the survey’s finding of lowered inventories and speeded-up deliveries by suppliers of parts and raw materials.

In good times, vendor deliveries generally slow because they have more orders than they can handle, Sfeir said. Faster deliveries generally indicate that manufacturers’ orders from vendors have slowed.

The quarterly survey, which polls purchasing managers at 60 Orange County manufacturers, also found that commodities prices are increasing.

That is an unusual occurrence in the face of a recession, but Sfeir said several respondents commented that the price increases are a direct effect of rising fuel prices from the Iraqi invasion of Kuwait.

Sfeir said the survey findings and comments from purchasing managers lead him to believe that the index will fall even lower in the fourth quarter.

Gauging the manufacturing sector A survey of Orange County purchasing managers indicates that in the third quarter production continued to grow, although the quality of purchased materials slowed. Meanwhile, commodity prices increased sharply and deliveries were slower. An index less than 50 indicates a decline.

4th 1st 2nd 3rd 1989 1990 1990 1990 Production 53.3 54.2 62.6 61.2 Inventories of purchased materials 62.9 44.6 46.4 43.5 Quantity of purchased materials 49.3 44.4 58.9 51.2 Commodity Prices 52.4 58.0 61.8 68.1 Vendor Deliveries* 46.5 51.2 59.2 47.5 Composite 51.0 47.1 57.5 50.1

* An index value of more than 50 for this category indicates slower deliveries: less than 50 indicates faster deliveries Source: Chapman College, Center for Economic Research