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Business Improved at Local Plants in August

By David Robinson

September 02, 2010
 

Business heated up during August at the Buffalo Niagara region’s factories, easing fears that the rebound by manufacturers was losing steam, a new report indicated Wednesday.

The report by a local purchasing managers group showed that the second straight month of stronger growth for the region’s manufacturers came less from rising production and new orders at local companies than it did from a significant drop in the number of firms that were cutting jobs or booking less new business.

Still, the growth reported by local manufacturers was the second-strongest since the recession began and the most robust since the business activity index of the National Association of Purchasing Management— Buffalo hit a post-downturn peak in April.

“The regional manufacturing sector continued to expand in August,” said Mikhail Melnik, a Niagara University economist. “However, the expansion does show clearly visible signs of leveling off and slowing growth.”

Overall, the group’s business activity index rose to 58.4 last month, its highest level since it reached 59.2 in April and better than the 54.6 reading in July. An index reading

above 50 indicates growth, while one below 50 is a sign of a declining economy.

Arthur Aramino, the local banking executive who is chairman of the purchasing group’s business survey committee, warned that the positive news in the August survey should be balanced against the sharply slower growth in production last month and a spike in commodity prices that he called disconcerting.

Nationally, manufacturing expanded in August for the 13th straight month, lifting hopes that economic growth won’t stall. The Institute for Supply Management said Wednesday that its manufacturing index rose to 56.3 in August from 55.5 in July.

Locally, the bright spot in the August report was a jump in hiring at local factories that pushed the group’s employment index to its highest level in nearly two years. More than 36 percent of the companies surveyed said they hired more workers last month, up from 28 percent in July, while fewer than 10 percent of the firms cut jobs, which was less than half of July’s level.

The flow of new orders, which had sharply weakened in May and June, rebounded for the second straight month, although most of August’s improvement came from a spike in the number of firms reporting a stable level of new business, while the number of firms booking fewer orders was cut by more than half.

Inventory levels, which had shrunk for three straight months, grew again during August as fewer companies worked down their stockpiles.

On the downside, production growth slowed to a crawl, with fewer companies reporting increased production last month and more companies reducing their output. That cut the group’s production index to a barely positive 50.9 from July’s reading of 60.8.