Manufacturing in O.C. Shrinks but Is Up Nationally : Economy: A better second quarter is expected locally. Businessmen are more confident than this time last year.

Manufacturing activity in Orange County shrank slightly in the first quarter, despite a slight improvement nationally, as the recession continued battering the county’s manufacturers, a new study shows.

But local manufacturers expect a better second quarter and are far more confident about the business outlook than they were last year at this time, according to the Chapman University Center for Economic Research’s purchasing managers survey.

The center’s purchasing managers index--a quarterly measure of manufacturers’ activity and optimism--rose to 47.6 in the first quarter, up from 36 a year earlier and nearly four points higher than the 44 level recorded in the fourth quarter of 1991.

When the index is above 50, it means the county’s manufacturing sector is expanding, while readings below 50 indicate a manufacturing contraction, said Raymond Sfeir, the university economist who prepares the survey.

A national purchasing managers index hit 51.3 for the first quarter, up from 36.7 a year earlier and a slight improvement from the 50.3 recorded in the fourth quarter. The national index shows that manufacturers in most other parts of the country saw business increase slightly in the first three months of the year.

Manufacturing employment in Orange County has been shrinking for nearly two years as the recession, the housing industry slump and federal defense spending cuts combined to deliver a knockout punch to many local companies.

For February, there were 275,900 manufacturing and construction industry jobs in the county, down 18,100 from 294,000 jobs a year earlier, according to the latest available state figures.

The local survey, Sfeir said, shows production levels actually increased in the first quarter from the fourth quarter.

But the higher levels of production were offset by shrinking inventories, particularly in the hard-hit aerospace industry, Sfeir said.

Most of the increases during the quarter were reported by medical equipment and instruments manufacturing firms.

Sfeir said some local companies said they expect sales to increase steadily this year, supporting predictions by various economists that the county could begin recovering from the recession by the third quarter.

Manufacturing Still Slow Manufacturing activity in Orange County declined in the first quarter despite a slight increase nationally. An index compiled by economists at Chapman University places manufacturing in the county at a level of 47.6 for the first quarter, compared to a national level of 51.3. Levels of 50 or more indicate growth. Source: Chapman University Center for Economic Research