Contraction of County’s Manufacturing Deepens

The manufacturing sector of Orange County slipped deeper into recession in the fourth quarter of 2001. The major indicators such as new orders, employment, and inventories of purchased materials fell further, below even the low levels of the third quarter. Commodity prices continued to decrease and supplier deliveries were faster. At the national level, the contraction continued for the fifth consecutive quarter.

Overall, the Composite Index fell again from 38.0 in the third quarter of 2001 to 34.9 in the fourth quarter, its worst level since the survey was started in 1988. This fall indicates that the manufacturing economy of the county has deteriorated further compared to the third quarter, and that the recession has reached deeper in most industries.

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The Composite Index consists of the results of the survey of Orange County purchasing managers regarding changes in the levels of production, employment, new orders, inventories of purchased materials and supplier deliveries.

Production was reported to have declined most rapidly in the following industries: Rubber & Plastics Products; Stone, Clay & Concrete Products; Fabricated Metal Products; Industrial & Commercial Machinery & Computer Equipment; Electronic & Other Electrical Equipment & Components; and Instruments. Although the Food & Kindred Products industry fared well in the fourth quarter, no industry reported any major increase in production. Commodity prices were reported to have decreased most rapidly in the following industries: Food & Kindred Products; Paper & Allied Products; and Fabricated Metal Products. Some price decline was also reported in the following industries: Industrial & Commercial Machinery & Computer Equipment; and Electronic & Other Electrical Equipment & Components. New orders were reported to have declined most rapidly in the following industries: Rubber & Plastics Products; Fabricated Metal Products; Industrial & Commerical Machinery & Computer Equipment; and Electronic & Other Electrical Equipment & Components. New orders were reported to be slightly higher in the Food & Kindred Products industry. Employment was reported to have decreased most rapidly in the following industries: Chemical & Allied Products; Rubber & Plastics Products; Industrial & Commercial Machinery & Computer Equipment; and Electronic & Other Electrical Equipment & Components.

The purchasing managers have also reported the following:

• A substantial decrease in the quantity of purchased materials for the fifth consecutive quarter.
  
  
• The decline in production was across all industry groups — High-tech, Durable Goods other than High-tech, and Non-durable Goods. The High-tech Goods industries performed worse than the other industries.
  
  
• Supplier deliveries were faster compared to the third quarter.
  
  
• Production in the Surgical, Medical, & Dental Instruments & Supplies industry increased. The industry fared better that the rest of the manufacturing industries.
  
  
• The purchasing managers expect the county’s manufacturing economy to remain in recession in the first quarter of 2002, but that it will contract at a lower rate.

This report is published quarterly by the A. Gary Anderson Center for Economic Research of Chapman University for more information please contact Dr. Raymond Sfeir, Professor of Economics at (714) 997-6693.