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Manufacturers on the Upswing : Economy: Employment, output have risen, Chapman University survey shows. Results back reports that county has begun slow recovery.

April 20, 1994|JOHN O'DELL | TIMES STAFF WRITER

Orange County manufacturers started the year on the upswing with employment, new orders and production all rising in the first quarter from the previous three months, a new report shows.

Manufacturers' business improved for the fourth consecutive quarter, according to the Orange County Purchasing Managers Survey released Monday by Chapman University's economic research center.

The survey, which included 81 companies, supports economists' reports that Orange County has begun a slow recovery from nearly three years of recession.

"Total manufacturing output increased in the first quarter," said Chapman economist Raymond Sfeir.

The survey also found that stockpiles of raw materials had increased for the first time in two years and that deliveries of raw materials by suppliers had slowed down. Slower deliveries show that business is picking up: A factory's suppliers tend to deliver rapidly when they don't have many orders and to slow down as increasing volume ties up their delivery fleets.

In all, Sfeir uses five such factors to develop a purchasing managers index--a measurement of growth and of confidence in the economy.

For the first quarter, the purchasing index stood at 56.5--the second-highest level in more than five years after a reading of 62 in the fourth quarter of 1993. Levels of 50 and above show degrees of growth, while levels below 50 indicate constriction. The previous high levels were recorded in the first three quarters of 1988--the year Sfeir began reporting the index.

The economist modeled the Orange County survey on a nationwide purchasing survey conducted by the National Assn. of Production Management.

Purchasing managers are interviewed because they are manufacturing's front-line troops. Their jobs require them to be able to forecast economic conditions so they can buy sufficient material to produce the goods needed to satisfy customer demands without making the expensive mistake of over-ordering.

Gains in Manufacturing

Orange County's manufacturing industries reported moderate growth in the first quarter compared to the same period a year earlier.*

A key to the index * 50 or more shows growth * Less than 50 indicates a slowdown

1990 (1st quarter): 47.1 1990 (2nd quarter): 57.5 Beginning of U.S. recession 1990 (3rd quarter): 50.1 1990 (4th quarter): 41.6 1991 (1st quarter): 34.9 1991 (2nd quarter): 47.3 1991 (3rd quarter): 51.5 1991 (4th quarter): 44.0 1992 (1st quarter): 47.6 1992 (2nd quarter): 51.5 1992 (3rd quarter): 47.6 1992 (4th quarter): 50.2 1993 (1st quarter): 43.8 1993 (2nd quarter): 51.6 1993 (3rd quarter): 50.5 1993 (4th quarter): 62.0 1994 (1st quarter): 56.5

* Chapman University's Purchasing Managers Composite Index measures six factors, including inventories, new orders, production and raw material purchases. The index gauges industry activity and purchasing managers' confidence in the economy.

Source: Chapman University; Researched by JOHN O'DELL / Los Angeles Times

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