O.C. Manufacturers Report Steep Declines in Production

Manufacturers in Orange County slashed production in the fourth quarter of 1990 and are pessimistic about the outlook for early 1991, a local economist said Thursday.

A newly released index of county purchasing managers’ confidence in the economy dropped to its lowest point ever in the last three months of 1990, tumbling more than 8 points to 41.6, from 50.1 in the third quarter. An index value below 50 indicates a decline in manufacturing.

The survey, by Chapman College economist Raymond Sfeir, shows that county manufacturers continued shrinking their supplies of raw materials in the last months of 1990 while simultaneously slashing orders for new material. And that, Sfeir said, is a strong indicator that the pessimism of the October-December period will carry over at least through the first three months of this year.

Despite a spurt of orders nationally for war-related goods, Sfeir said, not enough county manufacturers are affected to offset the overall economic slump.

The Chapman survey echoes a national purchasing manager survey and comes on the heels of a nationwide sampling of 5,000 adults that found consumer confidence at its lowest ebb in 10 years.

The Chapman survey and the national survey on which it is modeled measure anticipated growth in the manufacturing segment of the county’s economy. The college started its index in 1988.

Chapman’s fourth-quarter findings marked the first time the county’s usually optimistic index fell as low as the national index, which hit 41.7 in the final three months of the year, down from 46.3 in the third quarter.

The local survey, which tallies responses from purchasing managers at 60 manufacturing firms in the county, shows that 41.4% said production had declined in the fourth quarter. Only 22.9% reported production declines in the third quarter, while 32% cut production in the fourth quarter of 1989.

In addition, 42.5% shrank their raw material inventories, compared to 40.5% in the third quarter and only 24% in the final quarter of 1989.

* 52.9% cut back on purchases of new raw material, up from 34.9% in the third quarter and 35% in the fourth quarter of 1989.

“I would say that the decrease in production and inventories means manufacturers anticipate a lousy first quarter” and didn’t want inventories of unsalable finished goods to pile up, Sfeir said.