Despite recent troubles, many of the region's midsize manufacturers are optimistic about future revenue and employment growth, even though they consider Pennsylvania to be only a fair to poor place to do business.

	Online Graphic: Optimism for business, but less cheer about the business environment

A survey of 66 manufacturers released yesterday by the accounting firm Alpern Rosenthal painted a surprisingly positive picture of such basic industries as metals, chemicals and rubber or plastic products.

"Manufacturers have gone through some difficult times recently, but our survey results indicate that many have plans for ... expansion," said Joel M. Rosenthal, director of Alpern Rosenthal's Manufacturing Services Group.

The local survey comes as capital-goods industries across the country are starting to see increased orders for new equipment and a swelling backlog of unfilled orders. As the holiday shopping season approaches, companies also are starting to rebuild inventories depleted over the last couple of quarters in part because of energy-related uncertainties, said the Institute for Supply Management, whose local index of business activity has been rising on higher orders, production, employment and exports.

The Alpern Rosenthal survey focused on manufacturing firms, most of which are privately held and range in size from $5 million to $100 million in annual sales, with the bulk falling between $10 million and $50 million a year.

Roughly a quarter of those surveyed said their employment levels shrank over the last three years, down from more than half that responded that way in last year's survey. Moreover, 95 percent of the companies expect to increase employment over the next three years, with 11 percent projecting the jobs rise by 10 percent or more, Mr. Rosenthal said.

Almost all of the companies said they expected to see revenue growth in the next three years, with 61 percent projecting gains of 10 percent or more -- a result that Mr. Rosenthal said surprised him, particularly since nearly one-fifth of the companies reported revenue declined over the last three years.

"A lot of people are expecting growth greater than 10 percent, which I thought was very interesting," he said.

A slim majority, 52 percent, said they planned to expand in the state, while 31 percent said they were planning to expand elsewhere. Only 10 percent conceded that they intend to downsize operations here.

About one-third of the companies said they had lost business to offshore competitors in the past five years, and 18 percent said they themselves had ventured into the international market and owned a foreign concern.

For the most part, though, local manufacturers have remained domestic with international ties. They purchase an average 15 percent of their products from other countries, and many sell to foreign countries -- international sales averaged 11 percent of their overall sales.

A large majority, 79 percent, rated Pennsylvania as a fair or poor place to do business. Only 18 percent said it was a good place, and none chose excellent.

The survey did not ask the reason for Pennsylvania's poor marks, but business climate issues generally include taxes, infrastructure, labor cots and other economic factors.

But Mr. Rosenthal, a CPA, noted that, "It usually comes down to taxes."

He said many local manufacturing firms field overtures from other states that try to lure them away with financial incentives.

On the plus side, the companies rated their Pennsylvania work forces as assets. The companies said staff turnover was comparatively low -- 7 percent on average -- and that nearly 58 percent of their employees had been with the same company for more than five years.

After work force, the businesses listed the region's best assets as its geography, a regional hub, then transportation and roads, and the quality of post-secondary education.

"The big positive when you look at it is Pennsylvania's work force," said Mr. Rosenthal.