ORANGE, CA — Based on a survey of purchasing managers, the California Composite Index, measuring overall manufacturing activity in the state, increased from 58.9 in the third quarter to 59.2 in the fourth quarter, indicating that the manufacturing sector is expected to grow at a slightly faster rate in the fourth quarter. “Some purchasing managers are starting to see an easing in supply chain constraints, and a flattening of some raw materials prices. Nevertheless, difficulty in hiring is still an issue for some, and the inability to fill orders due to delays or shortages of raw materials still prevails in many industries. High inventory levels have also been reported,” said Dr. Raymond Sfeir, director of the purchasing managers’ survey. Commodity prices in general are increasing at a much lower rate, and supplier deliveries are slowing at a lower rate. Production, inventories of purchased materials, new orders and employment are all expected to grow at a higher rate compared to the third quarter.
Performance by Industry Group
The index for the non-durable goods industries increased from 54.4 in the third
quarter to 56.7 in the fourth quarter, indicating that these industries are expanding at a higher rate. Production, inventories of purchased materials, new orders and employment are expected to grow at a higher rate. Commodity prices are expected to rise at a much lower rate compared to the third quarter. Nevertheless, supplier deliveries are not expected to slow in the fourth quarter.
The high-tech industries include the following: Computer & Electronic Products, and Aerospace Products & Parts. The high-tech industries currently employ about 369,600 employees, amounting to 27.8% of total manufacturing employment in the state. The index for the high-tech industries increased from 64.0 in the third quarter to 66.6 in the fourth quarter, indicating a higher growth rate in the fourth quarter. Production, inventories of purchased materials, commodity prices, new orders and employment are expected to grow at a higher rate. Supplier deliveries are expected to be slowing at a lower rate as the index decreases from 76.7 in the third quarter to 70.6 in the fourth quarter.
The index for the durable goods industries other than high-tech decreased from 58.9 in the third quarter to 56.0 in the fourth quarter, indicating a lower growth rate in these industries. Production, inventories of purchased materials, commodity prices, and new orders are expected to increase at a lower rate in the third quarter. Supplier deliveries are expected to be slowing at a lower rate as the index decreased from 65.9 to 55.4. Employment is expected to increase at a higher rate in the fourth quarter.
Comments by the Purchasing Managers
Wage pressure and availability of qualified workers who want to work is still the number one concern at all of our production sites. (Food)
New orders seem to be slowing down, things were really busy initially after the pandemic. Seems like higher prices and economic uncertainty are setting in a bit and clients are hesitant to forecast beyond 2022. (Textile Mill Products)
New orders for big box stores are arriving much slower than last season. Retailers are nervous about talks of a recession. As for manufacturing, China continues to lack transparency regarding capacity and deliveries. Domestic warehouse labor is still challenging to find committed workers. (Apparel)
Regardless of what the kids in D.C. are attempting to convince us of, business has certainly slowed and costs have increased. If we are not in a recession, then we are certainly close to one! (Wood Products)
We are in a seasonal biz where the 4th quarter is huge. We have set up the company for growth even in a recession. However, I can tell you the industrial side of our company (brown boxes) is down. As well my box maker friends across the U.S. have been down since May as much as 30%. The US is in a recession. The box is the forward leading economic indicator. (Paper)
Costs continue to rise across the board sadly. Sales have gone down a bit since interest rates have gone up, most notably in our mortgage / realtor related book of business. Losing a few employees as they move on to other industries with better opportunities than print. Never really thought it would happen here, but have noticed quite an uptick in quiet quitting which has started to noticeably cut into our productivity. Q4 is usually pretty good for us sales-wise, but am seeing some significant headwinds as we roll into year end. Quite a mixed bag to say the least. (Printing & Related Support Activities)
Still struggling to improve margins. Sales are good. Suppliers are keeping up, for the most part, but prices continue to rise-and it is difficult to pass along increases as quickly as we would like. (Chemicals)
Inflation in labor is still super high. Talks of increases in the minimum wage for fast food workers is scary too. The cost of goods sold is coming down fast but sometimes the adjustment is not fast enough in my world. (Plastics & Rubber Products)
There is a lot of infrastructure work ,and we hope to be able to hire enough people to get it all done better than this current quarter. Paperwork processing of projects (getting plans and submittals processed and approved) has been an issue. (Nonmetallic Mineral Products)
Supply chain challenges due to logistics disruptions stemming from Covid-19 continue to impact (plant shutdowns, ports, etc.) business. Production delays due to limited supply of key commodities, limited capacity. Higher material costs, longer lead-times and labor shortages all impact Purchasing. (Primary Metals)
European business is off 90%. Customer sentiment is at a 40 year low. (Fabricated Metal Products)
Backlog increasing but we can’t produce enough to make up for it. Metal wire prices are flattening and stopped going up. We are hiring but the candidates aren’t great and they don’t stay. (Machinery)
The CHIPS act implementation is causing interest in buying capital equipment to support the growing onshore semiconductor industry. (Computer & Electronic Products)
Lots of supply chain disruptions due to many things from employment issues to lack of raw material. (Electrical Equipment, Appliance & Components)
Early in 2022, I have had to put more material raw and finished on order way earlier than I would normally in order to have it end of year and for 2023 for our orders. I have to take more inventory in to combat the long deliveries. That is why our inventory will go up but that I do not feel the supplier deliveries will get better for a while. (Transportation Equipment)
The furniture industry has seen a slowdown on retail floors. That said we have had several record shipping months this year. Perhaps all of this will help in getting lead times closer to pre pandemic times. The good News is… price increases on raw materials have seemed to calm down a bit. (Furniture & Related Products)
Doing business in California and Los Angeles County continues to be a huge struggle. Costs on everything are sky high. Parts and other items that we purchase to do business are often on backorders or not available at all. Many of our adhesives and paints have been banned in CA with no other alternatives to manufacture signs that are in high demand. It’s very frustrating and we don’t see any improvement, we actually are projecting that it’s only going to get worse as the government is showing no signs of changing their anti-business views…. (Miscellaneous)
We are increasing staffing as well as outsourcing to support demand. (Aerospace Products & Parts)
