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The Future Looks Good for Area Factories

By Jonathan D. Epstein

May 04, 2010

 The economy isn’t booming by any means, but business is picking up for Western New York’s long-beleaguered manufacturers.

A key index that measures manufacturing output in the Buffalo Niagara region increased in April for the fourth straight month and, even better, the pace of the growth accelerated.

The National Association of Purchasing Management-Buffalo’s index gained 5.7 points in April to 59.2 on a seasonally adjusted basis, hitting its highest level since August 2008. By contrast, the pace slowed in March, losing 1.9 points.

Moreover, its employment index surged almost 16 points to 60.9, countering a drop in March, as 94 percent of the managers surveyed said their firms either maintained or added jobs. That left the employment index at its highest point since September 2008.

“This is another positive sign,” said Arthur Aramino, the chairman of the group’s business survey committee.

“The economy of Western New York and its manufacturing sector have continued on the path of economic recovery,” said Niagara University economist Mikhail Melnik. “All of these indicators suggest that the pace of the expansion remains intact.”

Unfortunately, the group noted, the commodity price index also spiked by nearly 16 points to 81.3, its highest reading since July 2008. Such continued price increases can dampen production if not accompanied by higher demand, Aramino warned.

Still, Melnik noted, “It is better to be in a position of discussing the weaknesses in a recovery than in the position of discussing the strengths of a recession. I continue to believe that no double dip will occur this year.”

The group’s production index rose to 61.8, in its third straight monthly gain, with more than 56 percent of respondents reporting higher output. That’s the first time it exceeded 60 since October 2008 and its highest level in more than four years, since November 2005. New orders rose to 54.2, with half of respondents saying orders had increased.

As a result of the growth in orders and production, inventories of purchased goods increased to 55, its highest since July 2008, although Aramino cautioned that “I would not expect to see any major improvement in inventory levels” until the end of the third quarter or start of the fourth quarter.

“Typically, manufacturers cut back capacity during a recession, and it takes three to four quarters to ramp back up to pre-recession levels,” Aramino said. “Until then, the higher demand will keep prices” rising.

jepstein@buffnews.com