Manufacturing Stalls Amid War, Slowdown

California’s manufacturing sector stalled in the first quarter of 2003, a victim of war in the Middle East and a residual slowdown in several key industries, according to a survey of purchasing managers released Monday.

Chapman University’s quarterly survey of 347 California purchasing managers showed that overall factory activity in the state declined from 54.7 to 49.3 in the first three months of 2003. A value above 50 means that the manufacturing sector is growing, while a value below 50 means that it is contracting.

Chapman University economist Raymond Sfeir said the war with Iraq convinced many businesses to hold off making purchases, particularly in high tech. The index for technology industries plunged to 39.1 in the first quarter after hitting 53.9 in the fourth quarter of 2002. Sfeir said the technology sector showed widespread weakness, with computers, electronics and aerospace all posting declines in production and new orders.

“High tech has been lagging for a long time now,” Sfeir said. “We’re not expecting a lot in this quarter either.”

The index of manufacturing employment across the state increased slightly to 45.1 in the first three months of 2003, from 42.2 from the fourth quarter of 2002, meaning that employers are still shedding factory jobs, albeit at a slower pace than the previous quarter. When the employment index surpasses 50, companies are adding net jobs to their payrolls.

In the first quarter the fastest employment declines were seen in the textile, furniture and high-tech sectors. Over the last two years, California manufacturers have cut more than 263,000 jobs, or 14.2%, of the labor force.

A separate survey of Orange County purchasing managers showed that the index of manufacturing activity there inched up to 51.8 in the first three months of 2003 from 50.7 the quarter before.

Sfeir said several industries there showed some stirrings of growth, including medical instruments, food products and chemicals.