Purchasing Managers: California Manufacturing Is Slowing

ORANGE, Calif.—Chapman University’s latest survey of manufacturing purchasing managers in the state, released July 9, showed growth in the current Third Quarter is headed downward. The growth is the slowest since the Third Quarter of 2020 at the height of the COVID-19 pandemic.

“The purchasing managers reported railroad delays, higher freight costs, higher raw materials prices, continued supply chain disruptions and workforce shortages,” Raymond Sfeir said in a statement; he’s the director of Chapman’s A. Gary Anderson Center for Economic Research, which conducted the survey. “Some firms are getting more uncertain due to the possibility of a recession at the end of the year.”

The main statistic, the Composite Index, measures all factors in the survey, such as employment, commodities prices, and production. A number above 50 is positive growth.

The last time the Composite Index dove into recession territory it clocked 45.6 in the Second Quarter of 2020. COVID spread fast and caused massive layoffs in manufacturing and other sectors.

The new Composite Index number for the Third Quarter 2022 was 58.9, down from 64.6 in the First Quarter. The highest recent number was a scorching 70.3 from the Third Quarter of 2021.

The survey also projected inventories of purchased materials, new orders, and employment all are expected to grow at a lower rate.

The survey also looked at commodities prices, showing a slight decrease in this key inflationary pressure. Commodities costs are passed on to finished goods and services. Similar to the manufacturing number, anything over 50 warns of inflation.

The 93.3 score for the First Quarter was the highest recorded, but dropped to 85.6 in the Second Quarter just surveyed. Both are much higher than the 65.2 scored as recently as the Third Quarter of 2020.

Supplier deliveries also are expected to slow. And purchasing of non-durable goods – such as gasoline, food, and clothing—showed the slowest growth.

The high-tech industries, including computer and electronics products, employ about 362,000 people in California. That is about 28 percent of total manufacturing jobs. This sector’s growth slowed slightly. Employment is expected to grow in this industry at a slightly higher rate, the report said.

Supplier deliveries are also expected to slow, dropping from record levels last quarter.

Durable goods other than high-tech dropped to a lower growth rate. Production, inventories or purchased materials, commodity prices, new orders, and employment will increase at a lower rate this quarter.

“All customers except Costco have asked us to cancel pending orders and stop shipping,” one anonymous textile mill products manufacturer said, as reported in the study. That caused a layoff of nearly half of factory employees.

A food manufacturer said high gas prices and inflation are cutting into consumers’ spending.



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