Manufacturing Growth in O.C., Inland Empire Slips

Manufacturing activity in Orange County and the Inland Empire weakened in the fourth quarter, new surveys show. And experts see further troubles ahead in the near term as the energy crunch forces a growing number of companies to shut down or curtail production.

Overall, manufacturing in Orange County still grew slightly in the October-to-December period, according to Chapman University’s quarterly survey of purchasing managers released Monday. But factory production and employment grew at slower rates, and managers reported that new orders did not show any growth last quarter.

Raymond Sfeir, an economics professor at Chapman, said manufacturing in Orange County held up better than it did nationally, where there was an actual contraction in the fourth quarter for the first time since late 1998.

But Chapman’s latest reading of Orange County’s manufacturing activity--an index of 53--was down from 58 in the third quarter and just above the point that marks growth. A reading below 50 shows a contraction.

Similar monthly surveys of purchasing managers in the Inland Empire have shown a decline of confidence in that region as well. Managers in the survey were “relatively positive” until about three months ago, said Barbara Sirotnik, co-director of the Institute of Applied Research and Policy Analysis.

The institute’s latest report for December showed manufacturing improving a bit in the Riverside-San Bernardino area, to an index of just about 50. Still, she said, managers were expressing the highest level of pessimism about the economy since the report’s inception in 1993.

While there’s no comparable survey for Los Angeles County, the recent electricity crisis is having a broad effect on industries ranging from plastics to food processing to textiles, which uses natural gas to dye and shape fabric.

In Orange County, Sfeir said, purchasing managers complained that vendors were charging more for raw materials because of higher prices of natural gas and oil. Prices rose for a wide range of raw materials, including steel, copper and clothing materials, he said.

California’s recent electricity problems “will make the performance of the manufacturing sector even worse,” the Chapman report said.

Indeed, Boeing Co. announced production cutbacks in Huntington Beach on Monday to reduce power consumption. And Endevco Inc., a San Juan Capistrano maker of shock and vibration testing equipment, got notices from suppliers who said they have had to curtail operations because of electricity problems.

“It’s just now beginning,” said Don Minton, Endevco’s material manager. “I think most people are trying to anticipate what might happen, not necessarily what is happening. It’s an iffy time for everybody.”

Manufacturing in Orange County, which employs more than 233,000 people, was robust in the first half of last year, reflecting its diversity and a strong comeback after the Asian crisis slowed things down. But the activity has turned in the last two quarters, reflecting the softening in the general economy that is expected to continue through the year.

Hardest hit have been printing and publishing companies and the rubber and plastics industries, according to the survey, which reported layoffs of temporary workers at plastics companies.

In particular, Orange County’s high-tech manufacturing industry grew at a substantially lower rate in the fourth quarter than the third, even as these companies added employees at a faster rate than other manufacturers. Chapman’s report said a major downturn in the computer industry is feared.

One of the survey respondents, Meggitt Defense Systems in Tustin, reported that orders picked up at the end of last year. And so far this month, orders are “the same to better,” said purchasing manager Lorena Mague.