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Manufacturing Rebounds in State

A Chapman University survey finds growth in California in the third quarter, with a surprise boost in high tech.

October 15, 2003|Marla Dickerson | Times Staff Writer

California's manufacturing sector rebounded strongly in the third quarter, led by an unexpectedly robust showing in the high-tech arena, according to a survey of purchasing managers released Tuesday.

Chapman University's quarterly index of factory activity surged to 63.3 in the three months ended in September, up sharply from 47.5 in the second quarter. A value above 50 indicates that the manufacturing sector is growing, and a level below 50 suggests contraction.

Production and new orders fueled the rise as the state's factories appeared to be stirring to life after a prolonged slump. Even employment has shown flickers of activity as companies have demonstrated a bit more willingness to hire in a sector that has shed more than 300,000 jobs since factory employment began to slide in January 2001.

"We had expected some improvement but nothing this good," said Chapman economist Raymond Sfeir.

Sfeir said the 234 purchasing managers surveyed reported improvement across a host of industries, from food and furniture to chemicals and metal products.

But the biggest surprise came from the makers of computers, electronics and other tech gear. The survey's high-technology index jumped to 71.3 from a dismal 43.4 in the second quarter. More than 70% of high-tech manufacturers surveyed said their production quickened compared with the previous quarter, and nearly 80% reported an increase in orders.

Sfeir cautioned that the rosy figures did not mean that the state's battered high-tech manufacturing sector had shaken off all its troubles. What they do show, he said, is that purchasing managers are seeing more activity than earlier this year and that momentum appears to be building for continued growth.

"Things are clearly moving in the right direction," he said.

The results of the Chapman index are in sync with national indicators showing that the worst may be over for the U.S. factory sector. The Institute for Supply Management's monthly index has shown three consecutive months of manufacturing expansion. Industrial production has been rising, as have U.S. exports. Sfeir said California manufacturers, like their counterparts elsewhere in the nation, are starting to benefit from a weaker dollar that makes American goods more affordable overseas.

U.S. manufacturing employment remains in the doldrums, with more than 2.6 million factory jobs lost during the downturn. But there are signs of improvement. California gained 3,500 manufacturing jobs in September, the first increase since April 2002. Nearly 28% of purchasing managers surveyed by Chapman said they had added positions in the third quarter, up from about 19% the previous quarter.

It's nothing to write home about, Sfeir said, but it's a start.

"I don't expect we'll see tens of thousands of additional employees added overnight," he said. "But it's a sign that things are starting to change."

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