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Local factory activity slumps during February

Buffalo Niagara manufacturers have hit a slump.

The region’s manufacturers during February had their worst month since August as a nationwide slowdown in factory activity finally caught up with Western New York.

With new orders slowing to a crawl and hiring on hiatus, manufacturers in the region said their business declined for the first time in four months and just the third time in the past two years, according to a survey of purchasing managers by the Institute of Supply Management – Buffalo.

The weak report brought the region in line with the findings of a broader statewide survey of factory activity, the Empire Manufacturing Survey, compiled by the Federal Reserve Bank of New York. That survey has shown manufacturing in New York to be in decline for the past seven months, and a nationwide survey of purchasing managers also has shown weakness at U.S. factories.

“It’s still just a single month, but with manufacturing more broadly still weak, I’m not so sure it’s a fluke,” said Jay K. Walker, the Niagara University economist who compiles the monthly report.

The group’s business activity index slipped to 43.3 last month, from 51 in January, falling below the 50 mark that is the tipping point between an expanding economy and a declining one. It was the first time the index had been in declining territory since turning negative during August and October last year. Before that, the index had shown steady growth by local manufacturers since February 2014.

Walker said his optimism about local manufacturing over the next few months is muted, noting that the survey showed that the flow of new orders to Buffalo Niagara factories last month fell to its lowest level since August, with almost half of the purchasing managers surveyed saying orders declined at their firms during February. A slowdown in orders now could lead to lower production and reduced employment in the coming months.

As it was, hiring took a hit during February, with factory employment dropping for the second straight month as none of the managers surveyed said their firms added more workers last month, while a third said their work forces declined.

Production slumped for the first time in four months, with a little more than a quarter of the managers saying their firms reduced their output during February.

Commodity prices continued to decline, falling for the fifth straight months as oil prices remain low. Inventories shrunk for the seventh straight month.