Chapman Study Tracks Industrial Growth in O.C.

Orange County manufacturers saw productivity, sales and hiring rise in the third quarter, and many believe the growth will continue through the end of the year, a new survey shows.

Manufacturing growth in the county, considered a key indicator of local economic trends, was so strong “it was surprising,” said Raymond Sfeir, the Chapman University economist who conducts the private school’s quarterly survey of county-based manufacturers.

“It is quite unusual for production, new orders, employment . . . all to be up,” he said.

Overall, the quarterly economic confidence index issued by Chapman’s Center for Economic Research rose in the July-September period to its highest level since the first quarter of 1995.

At 61.4, the local index was six points higher than in the second quarter and almost 10 points higher than the national index released earlier this month. Readings above 50 indicate manufacturing growth, while those below 50 indicate decline.

“You can put me in the ‘very positive’ column, said Joel Moskowitz, chairman of Costa Mesa high-tech ceramics maker Ceradyne Inc. “Our West Coast operations are going at record levels now and we’re expanding our operations significantly.”

Ceradyne makes sophisticated industrial equipment, military armor and delicate orthodontic equipment. The company has just doubled its industrial division in Costa Mesa. In the past quarter, it hired 25 new manufacturing, research and administrative employees, bringing its Orange County payroll to about 150, Moskowitz said. “We’ll probably be hiring five to 10 more people in the next six months,” he said.

Manufacturing in the county is actually benefiting from a slowdown in the national growth pace, Sfeir said.

The price of raw materials, which tends to climb when business is good, has stalled in the last quarter because of the national slowdown, Sfeir said. As a result, Orange County manufacturers, whose high-tech, medical and aerospace goods are in demand worldwide, have been able to keep a lid on prices because their raw material costs aren’t climbing.

“It’s a big bonus” that is providing local manufacturers with more business and with funds to hire more workers and invest in improved production equipment, he said.

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Not everyone, however, is as happy as Moskowitz.

“For our business, which feeds into the computer industry, we just aren’t seeing that much optimism,” said George Burnett, a co-founder and vice president of electronic components maker Statek Corp. in Orange. “Business has been good, but we don’t see the opportunities for growth that we saw a year ago. Looking out a year or so in the future, things look flat to me.”

Ken Pansuria, co-owner of Fineline Circuits and Technology Inc. in Brea, said the pending presidential and congressional election may have put a temporary damper on some parts of industry.

His custom printed circuit business did “quite well” in the third quarter “and we were hoping the fourth quarter would be even better,” Pansuria said. “But in the last two weeks, things have gotten very slow. I think that maybe it is the election,” suggesting that businesses are holding back on orders and expansion plans until the votes are counted. Pansuria said his company does a lot of business with companies in the medical and communications equipment industries, which are heavily regulated.

Still, Sfeir said his survey, which drew responses from 133 manufacturing businesses in the county, found high-technology electronics manufacturing grew at the same level as other manufacturing industries in the third quarter. And on the average, electronics industry executives were just as optimistic as their counterparts.

In other areas, the survey found that all industries reported higher employment levels in the third quarter; 53% of respondents said production increased in the three-month period to meet heavier demand for their goods, and almost 47% said the volume of new orders for goods to be delivered in ensuing quarters had increased.

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Shiny Quarter

A survey of purchasing managers at Orange County manufacturing firms shows that industry enjoyed a strong third quarter. The survey gauges industry strength by tracking changes in production, raw material purchases, raw material prices, changes in employment and new orders. Survey results are formulated into an index. Levels above 50 indicate growth; ones below 50 show a decline:

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1st qtr. 2nd qtr. 3rd qtr. 1994 61.6 57.3 58.8 1995 65.2 59.1 57.8 1996 55.6 55.2 61.4

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Source: Chapman University Purchasing Manager Survey