It is no longer in dispute that manufacturing has been in recession for the better part of a year now. Furthermore , weakness in the nation's manufacturing sector deepened during the second quarter of this year. The good news is there's increasing evidence that we're at the bottom of the cycle, and a recovery is just over the horizon.

Initially, manufacturing was pulled down by declines in motor vehicle production and industrial equipment investment. And when those sectors began to stabilize and slowly recover, it was pulled still lower by an unprecedented plunge in business spending for IT/high-tech products of all sorts.

But it's not as if all of the nation's business sectors have been on the ropes of late. Overall construction activity in the non-residential building market has continued at a surprisingly high level in the current economic slowdown. Although business investment in new equipment and software has contracted over the past 9 months, money spent on the construction or renovation of non-residential buildings has expanded at a double-digit annualized rate during four of the past five quarters.

Still, there's no disputing the deterioration in industrial market fundamentals over the past year. After recording modest growth of 7.6% between 1997 and 1998, recently-revised U.S. Commerce Department numbers now show that total industrial construction spending plunged by 19.4% during 1999. Then it fell another 1.7% last year.

Between May 2000 and May 2001, total manufacturing production capacity in the U.S. increased by 4.2%. Over the same 12 month period, manufacturing industrial production fell by 3.3%. Consequently, industrial capacity utilization in the nation dipped to just 76.0% during May 2001 – its lowest level since the last recession ended more than 10 years ago.

However, industrial construction spending through the first 5 months of this year was running 7.9% ahead of the January-May 2000 total. The National Association of Purchasing Managers' (NAPM) comprehensive monthly survey of manufacturing sector activity improved a bit during June, with a particularly heartening gain in new orders. And the government's monthly survey of new orders specific to the materials handling industry showed the May 2001 orders value to be a modest 1.4% greater than during May 2000.

Overall, things are starting to look up. There's reassuring evidence that the economy has fallen into a ditch, not an abyss. Furthermore, the manufacturing sector will be back on a stable path to slow growth by the end of this year.