Orange County Register

Orange County manufacturers are expecting business to begin to stabilize in the third quarter, according to the new Chapman University survey of local purchasing managers.

If the purchasing managers are right, it will be the first time since the fourth quarter of 2007 that local manufacturing expands.

The school’s Orange County Composite Index is expected to increase from 40.3 in the second quarter to 50.1 over the next three months. (Anything above 50 means expansion, below 50 indicates contraction.)

“At least we are now at the bottom — at least we’re not going down any more,” said Raymond Sfeir, the Chapman economist who oversees the survey.

He said the purchasing managers he spoke with showed a major change in outlook.

“They were optimistic about the third and fourth quarters, which is a plus,” Sfeir said.

Unfortunately, he said, that optimism doesn’t extend to additional hiring, with employment  continuing to contract this quarter, although not as much.

The most encouraging news was on new orders, which jumped in the index from 40.4 in the second quarter to 57.2 for the next three months. Production also is looking good, rising from 43.4 in the second quarter to 55.8 in the next three months.

Manufacturing employment will rise from 34.3 in the second quarter to 41.0 for the next three months, but still be under 50, which would indicate hiring.

“We expected that because employment is always the last to adjust (to an upturn),” Sfeir said. “Employers will wait to hire until perfectly certain things will be rosy.”

In terms of sectors, non-durable goods shows the greatest strength, jumping from 37.1 in the second quarter to 52.1 during the next three months while high tech moved from 42.2 to 51.5. Durable goods other than high tech — machinery and other long-term purchases — will continue to contract, but slightly less, going from 40.9 to 48.9.

California, with more diversity in manufacturing, will do slightly better than Orange County. The California Composite Index is expected to increase from 45.1 in the second quarter to 53.8 in the next three months.

The Chapman survey is similar to the one done by the Institute for Supply Management at the national level. Chapman’s survey tracks changes in production,employment, new orders, inventories of purchased materials, commodity prices and supplier deliveries both for Orange County and the state.

Orange County’s survey, conducted in mid-June, reflects the responses of purchasing managers at 137 local companies.

See the full survey HERE.

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