Factory index falls for third month
Area’s manufacturing hurt by auto slump
June turned out to be a terrible month for the Buffalo Niagara region’s manufacturers.
With local factories feeling a big squeeze from production cutbacks by General Motors Corp. and Ford Motor Co., manufacturing throughout the region contracted at the fourth-fastest pace in at least a dozen years during June.
The June slowdown was similar to the slightly steeper contraction the local manufacturers endured last December, when the recession hit the region with a vengeance, according to the National Association of Purchasing Management — Buffalo, which compiles a monthly index of business activity at the region’s factories.
And the worsening slide among the local manufacturers comes at a time when factories nationally have been showing signs that the slump is beginning to ease.
“Over the past two months, we have seen a divergence between the Western New York manufacturing sector index and the national index,” said Arthur Aramino, the chairman of the local group’s business survey committee.
The local index tumbled for the third straight month to 39.5, down from 41.7 in May and only slightly better than the 37.9 reading from December, when the recession first hit the region head-on. An index reading of less than 50 indicates that the economy is shrinking. A reading above 50 signals growth.
In contrast, a comparable nationwide report on manufacturing activity showed the sector contracted less than expected in June, posting its best showing since last August and another sign that a recovery may be near.
The Institute for Supply Management, a trade group of purchasing executives, said its nationwide manufacturing index registered 44.8 in June, up from 42.8 in May.
The worsening slide among local manufacturers reflects the region’s heavy dependence on the auto industry, said Mikhail Melnik, a Niagara Universi-
ty economist. “These past two months have been particularly damaging for the industry,” as GM and Ford have launched temporary shutdowns in a bid to reduce bloated inventories of unsold vehicles, he said.
As a result, production at local plants dropped in June for the first time in four months, with the group’s production index sliding to 44.5 from a neutral reading of 50 in May, as just 17 percent of the firms surveyed increased output last month, down from 28 percent in May.
The flow of new orders remained dismal, shrinking for the ninth straight month, with the decline during June reaching the slowest pace in at least five years as half of the firms surveyed said they booked less new business last month, up from 44 percent in May.
With the number of factory jobs in the region hitting a new record low virtually every month, the group’s employment index tumbled to its lowest level since the association began keeping comparable records in 1997. None of the firms surveyed said they added workers last month, while nearly 40 percent said they cut jobs.
Commodity prices, which had given manufacturers a break beginning last fall as energy prices tumbled, rose for the second straight month as oil prices again topped $70 a barrel. Inventories shrunk for the 10th straight month, although at a slightly slower pace.
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