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Manufacturers hit rough patch ; Region at 3-month low for December growth

November's boom turned into December's bust for manufacturers in the Buffalo Niagara region.

An index of business activity at local factories found that growth slowed to a three-month low during December, reversing much of the growth spurt that those businesses enjoyed during October and November.

A drop in hiring and new orders, combined with flat production and rising commodity prices stung local manufacturers in December, reducing growth rates at the region's factories to their second-lowest level in 14 months.

But Mikhail I. Melnik, a Niagara University economist who tracks the monthly index of the National Association of Purchasing Management -- Buffalo, said the December decline could be more of a short-term blip than a sign that a longer-term slowdown is beginning.

"Although I do expect a slowdown in growth as we enter 2011, the statistics from December are insufficient to fully support this point," Melnik said. "I would like to interpret the pullback in the index as not necessarily a sign of weakness, but a sign of uncertainty."

Arthur D. Aramino, chairman of the purchasing managers group's business survey committee, noted that despite the December slowdown, the manufacturing index has been showing growth during every month but one -- September -- since November 2009.

"Essentially, the Western New York manufacturing [index] finished 2010 at the same level it ended 2009," he said.

Nationally, manufacturers produced more goods and booked more orders last month, leading to the fastest growth in factory activity since May.

The Institute for Supply Management said Monday that its index of manufacturing activity rose to 57 in December from 56.6 in the previous month. Any reading higher than 50 indicates growth.

Locally, the business activity index tumbled to 51.3 during December, remaining above the 50 benchmark that indicates an expanding economy but falling well below the November index of 60.6. The index stood at 53.2 in December 2009.

All of the components in the report took a turn for the worse during December. Production at local factories, which had shown strong growth in October and November, fell back to a stable level during December. A little more than a third of the local firms surveyed said output grew during December, down from slightly less than half in November.

The flow of new orders also slowed to its lowest level since September, with half of the firms booking less business during December, up from a third in November. That pushed the group's index of new orders down to a barely positive 51.9 last month, compared with 62.4 in November.

Manufacturers also cut jobs last month, with more than a third reporting smaller work forces, up from 7 percent in November. This pushed the group's employment index to its lowest level since September 2009.

Inventories shrank for the second straight month, while commodity prices grew at their fastest pace since April.