O.C. Manufacturing Picks Up Speed Despite Crisis in Asia

Orange County’s manufacturing sector gained speed in the fourth quarter despite Asia’s financial crisis, a new survey found.

Chapman University, which polled 110 purchasing managers in December on whether their companies were experiencing increases or decreases in production, employment, orders and inventories, said last quarter’s performance by county manufacturers was the best in nearly three years.

Its composite index of the relative health of the manufacturing industry jumped to 65.3 in the fourth quarter from the third quarter’s 57.0. An index of more than 50 indicates growth.

The fourth-quarter index was the highest since the first quarter of 1995, when it also measured 65.3. The only time the index scored higher was 66.9 in the first quarter of 1988, the first time Chapman conducted the survey.

The Orange County response was substantially higher than the nation as a whole. A comparable nationwide index compiled by the National Assn. of Purchasing Management declined to 54.3 in the fourth quarter from 56.5 in the third quarter, Chapman said.

However, Chapman warned that it expects the troubles in Asia to slow Orange County manufacturers’ growth this year.

“When the crisis started in the summer, many companies had orders in,” said Raymond Sfeir, an associate professor of economics at Chapman who conducted the survey for the school’s Anderson Center for Economic Research.

“That’s why things didn’t impact the Orange County economy immediately. But we are experiencing some impact in 1998,” he said, noting that some of the purchasing managers queried said they were treading cautiously and trying to keep inventories down.

At the end of 1997, though, growth continued unabated, he said. The employment index reached 61.6 in the fourth quarter, its highest level in the three years that Chapman has included it in the survey.

At Boeing Expendable Launch Systems in Huntington Beach, which participated in the survey, employment is up to 6,100 from 5,500 last May.

Company spokesman Walt Rice said the unit, the rocket-building division of aircraft giant Boeing, has experienced strong orders for its Delta expendable launch vehicles. It also works on the C-17 transport plane and the International Space Station project, he said.

“Those are all manufacturing based programs,” with all the assembly done in Huntington Beach, he said.

The poll also found that production expanded most in the furniture, publishing, electronics and transportation equipment industries, while the electronics and transportation businesses had the fastest job growth.

The high-tech segment was the strongest overall performer with an index of 73.7, Chapman said. No industry reported slower growth, although the surgical, medical and dental instruments sector showed lower employment than in the previous quarter. Sfeir said that might be an early indication of the effects of the Asian turmoil on companies that sell their products in those markets.

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Shiny Quarter

Orange County’s manufacturing industry outpaced the U.S. throughout 1997. The county’s fourth quarter was the strongest since the second quarter, 1988. The index measures industry strength by tracking changes in production, raw material purchases, raw material prices, changes in employment and new orders.

Note: Index levels above 50 indicate growth, below 50 show a decline

Source: A. Gary Anderson Center for Economic Research, Chapman University