We find ourselves in truly uncertain times, economically and otherwise. At the end of the summer, there were some hopeful initial signs that the manufacturing market had hit bottom, and could be on a modest upward trajectory by year end. Then came September 11.

Business uncertainties related to the events of that day make confident forecasting difficult at best. Initial surveys of both consumer and business confidence conducted within a few weeks of the terrorist attacks provided a discouraging near-term outlook. And there's not much data yet beyond those.

With that said, here's where we stood before September 11.Total manufacturing shipments were down a relatively small 0.5% between July and August. More encouragingly, the value of new orders was unchanged over the month after falling steadily for awhile.

In fact, the nation's overall industrial production level was 4.8% lower this August than last August, with output from the manufacturing sector down an even-steeper 5.5% over the year. Furthermore, the nation's overall capacity utilization rate fell to an anemic 76.2%.

Given the recent turn of events, we think it is most likely that the manufacturing sector of the U.S. economy will remain in recession until the spring of next year. Furthermore, we believe that most – if not all – industrial market indicators will almost certainly be in a turnaround mode at that point.

Why? Well, although global demand will likely still be improving only marginally at that point, the U.S. manufacturing sector will be in better shape than today because of: 1.) a streamlined cost structure (regrettably, undoubtedly partly tied to further declines in payrolls); 2.) lower raw materials costs (related to lower worldwide demand for almost all commodities and energy goods); and, 3.) improved manufacturing performance (i.e., accelerated productivity gains primarily attributable to with lower employment levels, smaller wage gains, and the moderation in input cost inflation). This combination should lead to improved profitability for U.S manufacturers – a condition that should help change the current vicious cycle of low business investment/depressed demand into a virtuous cycle of increasing investment/im-proved demand/business re-investment of profits.

Of course, there are plenty of uncertainties still surrounding the ultimate scope and duration of our war on terrorism. And with a quick resolution of the matter looking unlikely, the course of business and consumer spending remains unpredictable. While it's unlikely that a single spark will turnaround confidence, the embers of hope should be rekindled by next spring.