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Business activity at area factories slowed for second straight month

A steep drop in the flow of new orders to manufacturers in the Buffalo Niagara region, coupled with a slump in hiring and a slowdown in production cooled the growth at the area's factories in September, a survey of local purchasing managers found Monday.

The slowdown in growth among the region's manufacturers was the second straight monthly decline for the National Association of Purchasing Management -- Buffalo's business activity index, and pushed the index to its lowest point since June 2003.

While the index still shows growth at the region's factories, the rate of that improvement slowed during September to its slowest pace in more than two years.

"Business is expanding, but the decline that started (in August) continued (in September), said William Ellis, the chairman of the group's business survey committee. "Business activity in Western New York has slowed, and it also seems to be tracking the national index as it trends down."

The group's business activity index slid by 7.3 points during September to 51.3 from 58.6 in August. The September decline -- the second-biggest month-to-month drop in the last year -- followed an 8.5 point plunge in August. The 15.8 point drop from July to September was the biggest two-month drop by the index since an 18.7 percent plunge during the same period last year.

Any reading above 50 indicates improvement, and since the index has been above that benchmark since July 2003, the survey shows that the region's manufacturing sector has expanded for 26 straight months -- the longest streak of consecutive improvement in more than six years.

A major reason behind the slowing growth rate during September was the turnaround in the flow of new orders, which turned negative last month. The group's new order index plummeted by 21.1 points to slide to 45.1 -- a level that indicates that local factories booked less new business in September.

Local factories also showed signs that they are trimming their work forces again after several months of growth. The group's employment index fell steeply for the second straight month to turn negative at 49.3, down from 57.5 in August.

Production also slowed, but continued to increase slightly, with the group's production index sliding into neutral territory at 50.1 last month, down from 56.8 in August.

Commodity prices also jumped sharply as energy costs continued to increase, while inventory levels kept shrinking.

e-mail: drobinson@buffnews.com

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