Jul. 2--Inland Southern California's factories appear to be continuing a slow climb back toward being one of the region's active economic sectors, a report released Wednesday found.

The Purchasing Managers Index for San Bernardino and Riverside counties rose to 51.8 in June from 50.7 the previous month, the Institute of Applied Research at Cal State San Bernardino reported. It was the second straight month the index, considered one of the Inland area's key economic indicators, has been above 50.

If the PMI stays above that level one more month, it will signal that manufacturing in the two-county area has started an expansion cycle after a moribund period lasting more than a year. Economists look for three straight months of readings on the same side of 50 before considering a trend.

The national PMI is still below that level, but the reading of 44.8, up from 42.8 in May indicates that while manufacturing is still shrinking, the rate of contraction is slowing.

A higher PMI is significant for the economy because it means factories may have to hire workers or purchase supplies from Inland area vendors.

When the index, provided by the Tempe, Ariz.-based Institute for Supply Management, increased in May, economists suggested factories might be producing more in response to the likelihood that President Barrack Obama's stimulus package will need new supplies of building materials and other goods for public works projects.

Others suggested the increase was not based on new orders but rooted in manufacturers that have been selling product out of existing inventories finally needing to replenish some stocks.

"Factories do need to fill some shelves," said Raymond Sfeir, economics professor at Chapman University. "They've been on inventories alone for the last several months."

Many Inland manufacturers are small operations that produce building materials, everything from doors and windows to fireplace mantels, and they are unlikely to be seeing many new orders because residential and commercial construction activity remains weak.

But other factory executives say there has been an improvement.

"We are seeing that, over the last eight weeks or so," said Bob Kaplan, president of California Quality Plastics, an Ontario-based factory that makes a variety of products, including trophy cases and aquariums.

"It seems the bottom of the trough has been reached and it's a slow climb out," he said.

Kaplan said he's encouraged by a lot of custom orders from a variety of customers. That's a better sign than new orders coming in for only a few stock items, he said.

"We're not setting the world on fire, but it is getting better," he said.

Dan Weber, vice president for operations at Faust Printing in Rancho Cucamonga, said he's also seen a "slight uptick" lately, getting repeat business from area customers who need catalogs and other marketing materials.

"They're looking to sell more, so they need to print," Weber said. "But they're using less color and making decisions that save on the paper."

At PneuDraulics Inc., a Rancho Cucamonga firm that makes aircraft components, no recovery has been in evidence or is anticipated for a while, said Terry Herrmann, director of materials. The plant has more than 200 employees but has shed several dozen this year because of fewer orders.

"Our industry has stabilized, but aerospace is going to be sitting on its hands for at least 18 months," Herrmann said.

Reach Jack Katzanek at 951-368-9553 or at jkatzanek@PE.com

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