State’s Factory Sector Ends ’03 on Strong Note

California’s manufacturing sector ended 2003 on a strong note and appears poised for a rebound this year, according to a survey of purchasing managers released Thursday.

Chapman University’s quarterly index of factory activity increased to 63.9 in the three months ended in December, up from 63.2 in the third quarter. A value above 50 indicates that the manufacturing sector is growing, while a level below that suggests contraction. The latest survey marks back-to-back increases in the index and healthy levels of production and new orders, signs of momentum to begin 2004.

“It’s going to be a good year,” Chapman economist Raymond Sfeir said. “Manufacturing will not be the drag on the economy that it was before. Hopefully now we will join the rest of the economy in the rebound.”

However, he noted that bustling factories wouldn’t lead to a burst of hiring anytime soon. The employment component of the index edged up to 55.3 in the fourth quarter of 2003 from 52.5 in the third quarter -- positive territory to be sure, but hardly a signal that employers intend to boost their payrolls significantly.

“Everybody is trying to squeeze more and more out of every single employee,” Sfeir said. “They are looking at the bottom line and trying to increase their profits. Unfortunately, that is being done at the expense of employees.”

Sfeir said the 201 purchasing managers who responded to the statewide survey reported improvement across a swath of industries, including food, chemicals and machinery.

The strongest showing came from makers of computers, electronics and other gear. The high-tech component of the index -- which as recently as the second quarter indicated it was still contracting -- shot up to 67.7 in the fourth quarter, higher than the manufacturing sector as a whole.

“The high-tech sector was a sleeper for so long,” Sfeir said. “Now it’s waking up.”

Chapman’s index dovetails with other data showing the factory sector is on the mend. A forecast released Thursday by the National Assn. of Manufacturers in Washington predicts that U.S. manufacturing production will jump 6% in 2004, after edging up only 1.3% in 2003.

Meanwhile, an index of future U.S. business activity compiled by the Manufacturers Alliance/MAPI, a Virginia-based industry group, last month rose to its highest level in 31 years.