Local Manufacturing Growing, Survey Indicates

Manufacturers in Orange County enjoyed a strong economy in the second quarter and most signs point to continued, though slower, growth for the industry and the overall economy in the third quarter, according to an industry survey.

Production was up as demand for goods produced in the county overrode earlier weaknesses in the economy, according to a report by the Chapman University Center for Economic Research. Additionally, the report said, employment rose slightly as some local manufacturers added workers to keep up with demand.

A manufacturing index developed by the center to gauge the strength of the industry dropped slightly from the first quarter, but remained well above the corresponding national manufacturers’ index. The local industry accounts for about 18% of the employment in Orange County.

With scores above 50 indicating increasing strength in the industry, the Orange County index reading for the second quarter was 55.2, a slight dip from 55.6 in the first quarter. The national index, reported earlier this week, was 51.2, up from 45.4 in the first quarter.

The Orange County index charts changes in levels of production, employment, new orders, raw materials inventories and the speed at which suppliers deliver raw goods to the factories.

While supplier deliveries don’t seem at first glance to have much to do with factory production, they are an important tool in predicting economic strength. Slow deliveries generally are a good sign because they show that suppliers are swamped with orders.

In his quarterly survey of purchasing managers for Orange County manufacturing companies, Chapman economist Raymond Sfeir found that 17% reported slower deliveries in the second quarter, while fewer than 10% reported receiving faster service from suppliers. That was the best quarter since the July-September period of 1995.

At the same time, 48.9% of the purchasing managers said production had increased at their factories, the best showing since the final quarter of 1994. Increased production shows that demand for manufactured goods is up--a trend that generally carries over into increased wholesale and retail sales and stronger economic indicators in subsequent quarters.