Growth In The California Manufacturing Sector Is On An Upward Trajectory

ORANGE, CA Based on a survey of purchasing managers, the California Composite
Index, measuring overall manufacturing activity in the state, increased from 57.3 in the third quarter to 60.5 in the fourth quarter.
This indicates that the sector is expected to continue its recovery from the devastating effects of COVID-19. “The California manufacturing sector has recuperated 14.9 percentage points since the second quarter of 2020. It is shy 1.1 percentage points from the fourth quarter of 2019. The recovery that was forecast for the third quarter in our last report did take place as evidenced by the increase in employment in the sector,” said Dr. Raymond Sfeir, director of the purchasing managers’ survey.
Production, new orders, and employment are expected to increase in the fourth quarter. Additionally, commodity prices  are expected to rise, and supplier deliveries are expected to slow at a higher rate.

California Manufacturing at a Glance
Composite Index 60.5 Increasing at a higher rate
Production 65.6 Increasing at a higher rate
Inventories of purchased materials 54.8 Increasing at a higher rate
Commodity prices 69.0 Rising at a higher rate
Supplier deliveries 63.2 Slowing at a higher rate
New orders 60.8 Increasing at a higher rate
Employment 55.9 Increasing at a higher rate
Performance by Industry Group
The index for the nondurable goods industries increased from 56.9 in the third
quarter to 60.1 in the fourth quarter, indicating an expansion in these industries in the fourth quarter. Production, commodity prices, and employment are expected to increase at a higher rate in the fourth quarter. Inventories of purchased materials and new orders are expected to also increase but at roughly the same rate as the third quarter. Supplier deliveries are expected to be slowing at a higher rate.
The hightech industries include the following: Computer & Electronic Products, and
Aerospace Products & Parts. The hightech industries currently employ about 357,200
employees, amounting to 29.0% of total manufacturing employment in the state. The index for the hightech industries increased from 59.4 in the third quarter to 66.0 in the fourth quarter,  indicating an expansion in these industries. Production, new orders and employment are expected to increase at a higher rate in the fourth quarter. Commodity prices and inventories of purchased materials are expected to increase at roughly the same rate as in the third quarter.
The index for the durable goods industries other  than hightechincreased from
56.0in the third quarter to 56.7 in the fourth quarter, indicating an expansion in these industries.
Production and new orders are expected to increase at a lower rate in the fourth quarter.
Commodity prices and inventories of purchased materials are expected to increase at a higher rate. Supplier deliveries are expected to be slowing at a higher rate.

Comments by the Purchasing Managers

Very difficult getting people in California to work. Unemployment easier than working. (Food)

We expect seasonal changes – we sell more of our wine stock in the holiday season. (Beverage & Tobacco Products)

Freight is ridiculously slow and overpriced. We had been increasing orders, but the lack of the $600 will cause a slowdown. People aren’t getting what they need to make purchases. (Textile Mill Products)

Our inventory is way up – we are stuck with everything. We have half the employees we had in March. (Apparel)

Due to a myriad of issues, including the challenges of operating a manufacturing plant in CA, we will be closing our operations during the quarter. Volume has been negatively impacted by the pandemic, compounding the challenges of a fragile business model here. (Paper)

Production will be better because of the election. We are buying more because of the election, but expect to sell it all. We will be hiring more for the election. (Printing & Related Support Activities)

We are seeing a rebound in new orders and new customers. Along with this, longer lead times on raw materials and an increase in costs. Our customers seem nervous and want to book and receive their orders just in case there is a downturn in the supply chain or demand. (Chemicals)

We have seen prices rise due to freight and raw material increases. We have a seen a slow recovery in our markets outside of PPE and barrier work. We don’t expect the barrier material to increase until after schools return to in class study. (Plastics & Rubber Products)

Supplying lumber for the building sector is going to be strained in the final quarter. Wildfires and COVID-19 closures are driving the supply side and prices to extreme heights! (Wood Products)

We expect the residential renovation sector to stay strong through the winter as homeowners continue to spend money on their homes rather than on travel. We are adjusting our model to meet this change. (Nonmetallic Mineral Products)

With the impact of Covid-19 we have slowed down. We manufacture for all types of industries but primarily in Aerospace. This has slowed down since planes are not in demand at this time. (Primary Metals)

100% of our customers slow down with new orders. (Fabricated Metal Products)

We are starting to see more of a recovery taking place. The election will likely blip up or down but overall we are doing unexpectedly well. We had a few people leave during the downturn, and we are now working on getting replacements after holding off to see what was going to happen. (Machinery)

Very tumultuous times. Hard to see ahead. Many surprises for all sorts of reasons. On balance, current projects are deteriorating but new opportunities are emerging leaving a revenue gap we need to bridge over the next 6 to 9 months. (Computer & Electronic Products)

We won’t hire anyone new now – if we have too much work, we’ll go to overtime. (Electrical Equipment, Appliance & Components)

The ports are experiencing HEAVY congestion and not enough employees reporting to work. The cargo volumes have increased drastically due to the lack of passenger belly space in planes. Due to the continued impacts of Covid-19, there is significant equipment and capacity shortages that are contributing to delays nationwide. (Transportation Equipment)

We have seen an uptick in business in the home furnishings industry. Retailers and designers are reporting a good amount of activity following the pandemic related closures. (Furniture & Related Products)

Our industry is very volatile right now due to the government shutting down certain sectors and all of the civil unrest. Our state government continues to make terrible decisions that are really affecting our business and everyone else’s business that we’ve had meetings with. We’ve never had any thought of leaving the state but we’ve begun talking about that recently if things don’t improve soon. (Miscellaneous)

We’ve been very fortunate through this Covid-19 situation, it’s given us time to catch up on our 2-year backlog. The fact that we do very little business with Boeing is the main reason we haven’t closed. (Aerospace Products & Parts)

ABOUT THE ANDERSON CENTER FOR ECONOMIC RESEARCH

The A. Gary Anderson Center for Economic Research (ACER) was established in 1979 to provide data, facilities and support in order to encourage the faculty and students at Chapman University to engage in economic and business research of high quality, and to disseminate the results of this research to the community

NO COMMENTS

LEAVE A REPLY