NEWTON, MASS. — Late in 2000, some experts were predicting an economic turnaround in the first quarter of 2001. It didn't happen. Then the forecast was for a rebound in the third quarter. It didn't happen.

Now all the signs are in place indicating the economy might finally bounce back this year. But once again, the big question is when.

In its latest survey of the nation's purchasing and supply executives released last month, the Institute for Supply Management said that economic growth in the U.S. will strengthen through-out 2003 for both the manufacturing and non-manufacturing sectors. About 70 percent of the respondents expect revenues to be greater. Among those industries expecting the greatest growth over 2002: electronic components and supplies; chemicals; wood and wood products; transportation and equipment; instruments and photographic equipment; apparel; fabricated metals and food.

"Manufacturing, purchasing and supply executives are more optimistic about their organization's growth for the first half of 2003 and predict additional growth during the second half," said Norbert J. Ore, C.P.M., and chair of the ISM Manufacturing Business Survey Committee.

He added that the forecast "should be received as a source for optimism going into the new year."

The manufacturing sector can use some optimism. Manufacturing has been in a recession for 30 months and nearly two million jobs have been lost as a result of the downturn. Many of these jobs may never return. Several companies contacted by INDUSTRIAL DISTRIBUTION said there are many reasons why they don't anticipate hiring more employees. One of the main problems is manufacturers are reluctant to build inventories because spending by their customers has been so volatile from one month to the next. Not only are they leery about adding to their payrolls because work might dry up, they are also especially concerned about the rising cost of health insurance.

There also have been job losses resulting from companies moving overseas to find cheaper labor costs. Some companies that had opened up manufacturing facilities in Mexico are finding even those labor costs are too high. A number of companies now have facilities in China and some are looking to Africa for future growth. That impact has severely affected distributors. One distributor, who responded to ID's 56th Annual Survey of Distributor Operations, said that he had lost nearly 20 percent of his customers because they had opened plants in other countries.

Whatever happens in the next several months, most economists and industry observers say that when business comes back, it won't be the strong growth seen previously after recessions but a gradual build up in orders.

One of the segments hardest hit by the economic downturn has been the machine tool business. Ralph Nappi, president of the American Machine Tool Distributors Assn., and a long-time industry observer, notes that machine tool sales reached their peak in 1999, when it had one of their best years on record. Since then business has dropped 62 percent. "This is the deepest trough we've ever been in," Nappi said. "Many companies clearly are not going to make it."

Nappi said it is going to be a "very, very slow process" for distributors to crawl out of this economic downturn. And, he pointed out, it's never been more critical for distributors to unbundle their products and be paid for the many services they provide.

Meanwhile, the North American construction industry remains one of the strongest economic sectors, according to Reed Construction Data's North American Forecast. Low interest rates continue to help the residential housing market while there will be a "stable but modest demand" in the industrial/office construction market.

Ken Simonson, chief economist for Associated General Contractors, expects the next several months to be rather uneven for construction. Any construction related to consumer activity should remain strong and business-related construction should pick up gradually in 2003, he said. However, government related jobs are likely to diminish once current jobs are completed.

All in all, 2003 promises to be better than 2002. The question is: how much better?