The local defense industry,a shrinking sector for much of the past decade,could shore up Southern California’s economy this year amid a national slowdown, forecasters said.
Although the defense and aerospace industry in Orange and Los Angeles counties is no longer the formidable force it was 10 or 20 years ago, it still packs enough of a punch to offset the local effect of slower economic growth, as well as slower growth in construction spending and international trade.
“The increases in defense spending will function as a buffer zone and mitigate the impact of slower GDP growth,” said Esmael Adibi, director of the A. Gary Anderson Center for Economic Research at Chapman University. “The corporate headquarters of the prime defense contractors have disappeared from the area, but there is still a lot of activity in terms of the number of subcontractors that are based here.”
Adibi said he expects defense spending to take off in the second half of 2001. On average, defense spending is projected to increase by 12.6% this year, compared to 5.8% in 2000 and a 6.2% decrease in 1999.
“What is important is that the increases in defense spending are not going toward more personnel but toward products, which is more beneficial to the local economy,” Adibi said. “And I expect that under a Bush administration we can expect even larger increases in defense spending.”
Historically, Republican administrations have been more generous in defense spending and, during last year’s campaign, President Bush committed himself to building up the military.
Last month, Costa Mesa-based Ceradyne Inc. said its fourth-quarter bookings are expected to exceed $15 million, a company record, after the industrial ceramics maker was notified about a $6.7 million government order for military armor.
“Our portion of defense has been going up,” said Howard George, Ceradyne’s chief financial officer.
“We received a lot of hard orders this year and we expect more later this year. As a whole we’ve had a record 2000 year, we look to continue that.”
Ceradyne, which employs 250 people in Costa Mesa, makes body armor and armor for military helicopters. The company also serves the semiconductor and other industrial markets. n
Petersson is a staff writer at the Los Angeles Business Journal. Stephine Michrina contributed to this article.
