Factory Growth in O.C. at a Standstill

Growth in Orange County’s manufacturing sector came to a standstill in the second quarter, in contrast to figures showing factory activity continuing to pick up steam nationwide, according to a survey of Orange County purchasing managers released Tuesday.

Chapman University’s quarterly index of purchasing managers declined to 49.9 in the second quarter, after surging to 57.7 in the first three months of the year. A value over 50 means manufacturing activity is growing, while a number under 50 indicates contraction.

Chapman University economist Esmael Adibi blamed the decline in the index on continued weakness in the county’s high-tech sector as well as a slowdown in inventory restocking that occurred in the first quarter.

“It’s a little disappointing after a solid first quarter,” said Adibi, director of the Anderson Center for Economic Research at Chapman University. “We are seeing a pause after all that inventory rebuilding.”

The second-quarter performance of the Orange County purchasing manager’s index stands in contrast to recent figures from the Tempe, Ariz.-based Institute of Supply Management, which compiles a much-watched monthly index measuring the strength of manufacturing activity nationwide.

That index rose to 56.2 in June from 55.7 in May, reflecting the fifth straight month of factory expansion.

Adibi said the worst appears to be over for Orange County’s manufacturing sector, which has shed more than 12,000 factory jobs from its pre-recession peak.

Still, he said the local index appears to be lagging behind the national figures partly because the Orange County factory sector is more heavily weighted with high-tech firms, which still are suffering the effects of the tech meltdown and declines in commercial aircraft production.

The Chapman University survey’s high-tech index slid to 43 in the second quarter from 54.6 in the first three months of the year.

Orange County purchasing managers surveyed by Chapman University reported declining prices and a big drop in new orders. Adibi said that bodes ill for profits as well as employment, as manufacturers probably won’t add to their payrolls until they are convinced that the fledgling recovery is for real.

“It’s a wait-and-see situation,” Adibi said. “Everyone is waiting until those new orders come in.”