U.S. manufacturing is finally on the mend — though as many factory bosses are quick to point out, when you’re in a hole this deep, everything looks up. That’s certainly true of capacity utilization.

The numbers show U.S. factories remain “grossly underutilized,” writes Daniel Meckstroth, chief economist of MAPI/ Manufacturers Alliance, in a new report. Capacity utilization, which includes manufacturing, mining and utilities, has been hit hard in this recession, reaching 70.5% in September after being in the 80s for years. In the manufacturing sector, factory utilization for September ticked up to 68% — rising from a post World War II record low of 65% in June. Capacity utilization for manufacturing dropped like a rock in this recession, falling from 79% in December 2007. The problem, as Meckstroth notes, is that while any movement upward is welcome, there has to be a lot more growth to simply soak up all those idle machines and assembly lines.

Looking beyond the headline number points to another sobering reality: Some industries were hit much harder than others — and therefore have further to go to get back to more normal utilization. Capacity utilization in primary metals plunged from 86% in December 2007 to 55% currently, mainly because of collapsing demand for some types of steel, while the utilization rate in the computer and peripherals industry fell to 58%, down from 83% in December 2007.

Each industry got hammered by its own mix of headwinds. Computer sales suffered as businesses postponed information technology upgrades and laid off white-collar workers, while makers of big ticket items such as furniture and cars suffered because consumer financing dried up even for those still eager to buy.

Only a few industries avoided going off the cliff. Capacity usage in the petroleum refining and coal industries fell only 1 percentage point over the last 21 months, while in the food industry, usage declined only 2 percentage points.

One upshot of all this factory slack, according to Meckstroth, is that there is little incentive for companies to invest in new equipment or other expansion. “A high level of capacity utilization is associated with strong growth in business investment and low utilization is consistent with falling investment,” he writes. Even so, Meckstroth’s group, which represents mostly large, multinational manufacturers, is expecting to see growth in business equipment spending in 2010 in high tech, transportation equipment, and business software.