California Manufacturing Drops Again
in the Second Quarter of 2003

The California Purchasing Managers, in the latest survey, reported that the California’s manufacturing sector declined in the second quarter of 2003. The Composite Index decreased for the second consecutive quarter, dropping from 49.3 in the first quarter of 2003 to 47.5 in the second quarter. there were decreases in inventories of purchased materials, new orders and employment. The only bright spot was an increase in production.

It is also noteworthy that California’s composite index dropped below the index for the U.S. for the second consecutive quarter. The higher proportion of high-tech companies in California coupled with faster increases in workers’ compensation costs compared to the nation are possible reasons for this trend.

The index for the high-tech industries stood at 43.4 indicating that the high-tech industries declined in the second quarter, albeit at a slower rate of decline compared to the first quarter of the year. The index for the non-durable goods industries stood at 48.0 indicating a decline as well. The index for the durable goods industries other than high-tech stood at 50.3 indicating only marginal growth compared to the first quarter.

Production was reported to have increased most rapidly in the following industries: Food; Chemicals; Nonmetallic Mineral Products; Fabricated Metal Products; Wood Products; and Furniture & Related Products. New orders were reported to have increased most rapidly in the following industries: Apparel; Chemicals; Wood Products; Fabricated Metal Products; Electrical Equipment; Appliance & Components; and Computer & Electronic Products. Employment was reported to have decreased most rapidly in the following industries: Paper; Printing & Related Support Activities; Primary Metal; Fabricated Metal Products; and Computer & Electronic Products.

Nationally, the average level of the Purchasing Managers Index decreased from 50.2 in the first quarter of 2003 to 48.2 in the second quarter, indicating that the manufacturing sector at the national level exhibited a decline. Both production and new orders grew in May and June. The employment index remained under the 50 level in June for the 33rd consecutive month indicating that employment in the manufacturing sector continued to decline. The commodity price index stood at a level of 56.6 in the month of June indicating that commodity prices continued to rise.

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.

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