Rising Index Buoys Hopes of Manufacturers : Economy: Chapman University study shows production activity in the county increased, albeit slightly, for the second consecutive quarter. Strong showing in the computer and electronics industries.
After more than two years in decline, Orange County’s manufacturers say they are looking at 1993 with renewed if still tepid enthusiasm.
During the final three months of 1992, manufacturing activity in the county increased for the second consecutive quarter, according to a study by Chapman University economist Raymond Sfeir.
And while Sfeir’s composite index of manufacturing activity barely broke the stagnation mark, rising to 50.2 from a third-quarter reading of 47.6, it included a significant increase in high-technology production involving the long-suffering electronics and computer industries.
Index readings below 50 indicate declines in manufacturing, while readings above that level reflect increases. The fourth-quarter measure marks only the third time in the past 10 quarters that the local index has topped 50.
Sfeir designed the survey, which queries purchasing managers at 90 manufacturing companies in the county, to parallel a nationwide study conducted each month by the National Assn. of Production Management. That study’s composite index hit a level of 53.8 for the fourth quarter, which would indicate a stronger recovery nationally than in Orange County.
“But the direction Orange County manufacturing is heading is the same direction as nationally,” Sfeir noted.
Economists have targeted production managers rather than the presidents or owners of manufacturing businesses because the production managers are responsible for gauging immediate and future demand for a company’s products, scheduling production and ordering raw materials to meet those demands.
Key ingredients of the composite index for manufacturing include actual production output, inventories of raw material on hand at the end of the period and the amount of raw materials purchased during the period.
When inventories shrink and materials purchases increase, Sfeir said, it generally means that manufacturers are raising immediate output in anticipation of growing future demand for their products.
The fourth-quarter survey, he said, showed continued declines in inventories and a slight overall increase in materials purchases.
In other words, while there is some optimism, the county’s manufacturers aren’t singing hallelujahs yet.
Inventory declines were seen especially in the foods, chemicals, fabricated-metal products and transportation manufacturing industries. Increases in materials purchases were evident in machinery manufacturing--including computers--but were offset by decreased purchasing in the transportation and instrumentation industries.
In its measure of factory output during the latest quarter, the survey’s production index hit 61, a high for the year and an increase of almost four points from 57.3 for the third quarter.
The only production decreases, Sfeir said, were reported by production managers at aerospace companies, which are being hurt by cuts in the defense budget.
O.C.’s Manufacturing Sector
The latest survey by the Orange County Purchasing Managers shows that manufacturing in the county increased slightly in the final months of 1992. The Index
50: Sector is at a standstill
Above 50: Expanding
Below 50: Shrinking
Source: Chapman University Center for Economic Research
