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Activity declines at local factories Slowdown was largest in 15 months

Local manufacturers took a bit of a holiday breather in December.

A drop in production at local factories, coupled with a slower increase in the flow of new orders caused the growth rate among local manufacturers to slide to its slowest pace in 15 months, a local purchasing managers group said Tuesday.

The December drop -- the biggest one-month decline for the National Association of Purchasing Management -- Buffalo's business activity index since August 2004 -- came a month after the index enjoyed its biggest one-month jump in 16 months during November.

The slowdown in growth also broke a three-month streak of faster growth among local manufacturers -- a month after the national index showed that the nation's manufacturing sector contracted during November for the first time since April 2003.

"This month, businesses experienced the slowdown that was noted last month at the national level," said William R. Ellis, the chairman of the local group's business survey committee.

Whenever the group's index tops 50, it indicates growth at local factories. Since the index has been above that since July 2003, the survey shows that the region's manufacturing sector has expanded for 42 straight months -- the longest streak of consecutive improvement in more than nine years.

The slowdown in growth last month was most pronounced in the decline in production at local factories, which contracted for the first time in 15 months and just the second time since mid-2003. That slump, coupled with a steep slowdown in the still-growing flow of new orders to local factories and a slight weakening in employment growth, added to the impact of shrinking inventories and higher commodity prices.

Production at local factories continued to see-saw wildly, sliding to its lowest level since October 2005 after surging to a six-month high in November. The group's production index plunged by 18.3 points to 47.6 last month from 65.9 in November as 43 percent of the firms surveyed reported a drop in output, more than double the 18 percent that noted declines in November.

The flow of new orders, which had rebounded strongly since a steep plunge in August, took a turn for the worse in December, with the group's new order index sliding to a still-positive 52.4 from 61.4 in November. More than 38 percent of the firms surveyed said the flow of new orders slowed during December, up from 27 percent in November.

The pace of hiring at local factories grew more slowly for the fifth time in the last six months during December as the number of firms adding workers last month slowed to 29 percent from 40 percent in November. That pushed the group's employment index down to 57.1 from 59.1 in November.

Inventories shrunk for the fourth straight month, pushing the group's inventory index down to a 13-month low of 38.1 from 43.2 in November, as 38 percent of the firms reduced their stockpiles.

Commodity prices also kept rising, but at a slightly slower pace.


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