Press Releases

YORK, March 10, 2004 The manufacturing sector continues to dominate as an economic driver for the 9-county region that represents South Central Pennsylvania, according to a major new study sponsored by the Pennsylvania Industrial Resource Centers (IRCs) and the TEAM PA Foundation.

Described as the most ambitious and comprehensive research of any of the states' manufacturing industries ever conducted in the U.S., the study is entitled "Manufacturing Pennsylvania's Future: Regional Strategies that Build from Current Strengths and Competitive Challenges." It was commissioned in the fall of 2003 by the state's IRC network, and it was conducted by Deloitte, an international consulting firm. (An executive summary can be viewed at www.mantec.org/briefs.cfm?briefcatsid=35.

The complete, detailed report may be viewed at http://www.catalystconnection.org/bkh/report.htm )

The purpose of the study was to document the role of manufacturing in several regions of state and to analyze the forces shaping the future of the sector. Commenting on the study, Dennis Yablonsky, Secretary of the Department of Community and Economic Development (DCED) noted, "Through the detailed analysis offered by this study, we can begin to closely examine Pennsylvania's manufacturing industry by sector and by region. This report will assist us in developing smart and effective strategies that can be applied at the local level to provide support for Pennsylvania's largest legacy business sector."

According to the Deloitte report, manufacturing remains the number-one industry sector in South Central Pennsylvania, accounting for approximately $10.9 billion in annual output, which represents 19 percent of the region's total in 2003. Manufacturing also is the largest sector for employment in the region, employing more than 144,000 people.

Over the past ten years, the region's manufacturing sector has grown 1.8 percent, which was slightly below the average for all industries within the region. However the challenges inherent in the past recession affected the sector more than other industries. Manufacturing's output growth rate over the past three years was negative three percent, well below the region's average of 2.5 percent.

South Central Pennsylvania's Driver Industries

According to the study, which examined the state as a whole, as well as each of the seven IRC regions, the south central region is home to seven of the state's 16 "driver industries" that are responsible for producing nearly 50 percent of the state's manufacturing output. These driver industries common to the state and region include: -Electrical Equipment -Paper -Electric Lighting Equipment     -Foods -Architectural and Structural Metals -Pharmaceuticals -Other Electrical Equipment and Components

The Audio and Video Equipment Industry sector is identified in the report as emerging economic driver for South Central Pennsylvania with an output of $183 million in 2003.

Since 2000, the region's fastest growing sectors were: other electrical equipment and components (7.6 percent annually); Audio and Video Equipment (3.5 percent annually) and ventilation, Heating, Air-conditioning and Refrigeration equipment (also 3.5 percent annually).

According to the report, sectors that suffered declines or near-zero growth during the same period were: paper (-4.2 percent annually); sugar and confectionary products (-2.7 percent annually); beverages (-2.5 percent annually) and printing (-2.4 percent annually).

This analysis evaluated manufacturing sectors and regions according to a comprehensive criteria that measured manufacturer output totals, output growth and employment rates over a ten-year period, in addition to a special wealth creation index that factored average output per employee, average real wages, capital expenditures and shareholder value. Other Highlights

"South Central Pennsylvania's manufacturing wages are "slightly higher than average" relative to other industries. The average manufacturing wage in 2003 in the region was $39,553 per year.

-The region is strong in several moderately technology intensive industries, most notably audio and video equipment; agriculture, construction and mining equipment; and heating and cooling equipment.

-The region's specialization in moderately technology intensive manufacturing industries exceeds specialization in industries that are very technology intensive (e.g. pharmaceuticals).

-Average productivity per employee in manufacturing throughout the region is $75,283 lower than the Pennsylvania average of $86,814, and lower than the U.S. average of $96,549.

-The overall average annual productivity growth rate for the region is 3.2 percent; leading industries in terms of productivity are pharmaceuticals, electrical lighting equipment and other electrical equipment.

-The audio and video equipment sector set impressive productivity growth rates in the region, increasing from $118,732 in 1993, to $310,913 in 2003 (160%). "Manufacturing is still a critical component of the economy, and wages in the manufacturing sector remain competitive, offering workers a good standard of living," said John W. Lloyd, president and CEO at MANTEC. "The key is how the region can leverage its current industrial strengths, along with its vast educational and research and other resources to shape a manufacturing economy that will take us to newer heights of prosperity."

Statewide Results

Statewide, the 16 driver industries identified by the report included: -Pharmaceuticals -Electrical Equipment -Plastics -Printing -Food -Paper -Basic Chemicals -Metalworking Machinery -Architectural and Structural Metals -Machine Shops -Other Fabricated Metals -Wood Products -Furniture -Resin, Rubber and Fibers -Glass -Medical Equipment

The study found that while the state's manufacturing sector ranks among one of the largest in the nation, it is currently dominated by small- to medium-sized companies with a high concentration of commodity-driven product lines. With contributions of $64 billion annually to the gross state product (GSP), manufacturing remains the largest of all sectors and remains the primary economic driver for Pennsylvania. For comparison, while manufacturing represents 14.8 percent of nations gross domestic product, in Pennsylvania, manufacturing represents 16.1 percent of GSP.

The IRC Network

Seven regions within Pennsylvania were analyzed individually, as well as the state as a whole. The geographic boundaries of the Pennsylvania Industrial Resource Centers provided the basis for the report's structure. These were designated as:

"Northwest IRC (NWIRC)

"Catalyst Connection (southwestern Pennsylvania)

"Northeastern Pennsylvania IRC (NEPIRC)

"Manufacturers Resource Center (MRC-Allentown, Bethlehem, Easton metro )

"Delaware Valley IRC (DVIRC-metro Philadelphia area)

"Industrial Modernization Center (IMC- central Pennsylvania)

"MANTEC (South Central Pennsylvania)

Pennsylvania's IRCs provide services for small- and medium-sized manufacturers across a broad range of business disciplines, including business strategy, technology infusion, quality and process improvement, plant layout, business systems and management, human resources and workforce development and other areas of service.

MANTEC, Incorporated, operates under contract with the Pennsylvania Industrial Resource Centers through the Pennsylvania Department of Community and Economic Development, as well as the Manufacturing Extension Partnership of the National Institute of Standards and Technology (U.S. Commerce Department).

For manufacturing related companies committed to attaining measurable improvement in productivity, profitability and competitiveness, MANTEC leverages private and public monies for cost-effective solutions delivered by proven providers.

### Contact: Jeff Davis @ (717) 843-5054, extension 245 or davisje@mantec.org

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