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A surge in new orders and a strong increase in production at local factories during August pushed activity at Buffalo-area manufacturers to its highest level in 17 months, a local purchasing managers group said Tuesday.

The National Association of Purchasing Management-Buffalo Inc. said its index of local manufacturing activity strengthened for the third straight month and posted its biggest single monthly increase in more than 2 3/4 years.

"Overall, Western New York manufacturers are showing signs of recovery after being in a neutral mode for four months," said William Ellis, the chairman of the Buffalo purchasing group's business survey committee.

The local purchasing managers index soared to 58.8 during August from 49.3 in July, rising above the important 50 benchmark that is a sign of a growing manufacturing sector. Likewise, a reading below 50 indicates weakening factory activity -- a level that the Buffalo index had fallen below during the previous four months.

Economists closely watch the purchasing managers index because it gives the first glimpse at how the economy fared during the previous month. The Buffalo purchasing managers report also is routinely cited in the Federal Reserve Board's closely-watched "beige book" of regional economic conditions.

Ellis said the sharp improvement in the local index stemmed from a surge in the flow of new orders to local factories, which soared by 15 percent last month and pushed the group's new order index to 65.2. Nearly half of the local companies surveyed said they took in more new orders last month, while just 17 percent said the flow of new business declined. The flow of new orders was the strongest since March 1998.

At the same time, local factories were making more products, with the group's production index rising to 58.7 last month from 52.4 in July. Most of the improvement came from a 7 percentage centage point drop in the number of companies cutting production, and a nearly corresponding increase in the percentage of firms boosting their output.

The job market also strengthened significantly, with the group's employment index shooting up to 56.5 last month from 45.3 in July. "Employment in the manufacturing business increased, and if the new orders are an indicator of future activity, employment should hold up," Ellis said.

Commodity prices continued the slow, but steady increase that has been under way for most of this year, while inventories held fairly steady, the group said.

At a national level, the National Association of Purchasing Management said its index measuring industrial activity rose to 54.2 percent, up from 53.4 in July.

The employment index for August stood at 53.4 versus 49.6 in July, indicating a further tightening in the labor market.

The August price index was 59.8, compared with 54.7 in July, indicating some increase in inflation. Prices for oil, aluminum, copper, plastics and paperboard all rose during the month.

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