While there are still some major things still wrong with the U.S. economy, much has turned around since the depths of The Great Recession. Employment numbers continue to strengthen, consumer confidence is rising and even housing is showing some signs of a recovery. Perhaps most interesting is the persistent manufacturing revival. Considered "left for dead" in the face of cheaper-waged emerging market nations, the U.S. manufacturing sector has surged since the credit crisis. Recent data continues to support the industrials. For investors, the sector could offer strong dividends and outperformance in the months ahead.

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Rising ISM Numbers
As the "bed-rock of America," the capital goods and industrial manufacturers have continued to see gains, as the economy has begun to improve. Over the last two years, the industrials have benefited from inventory replenishment and have increased production accordingly. Manufacturing continued to expand in March, as the Institute for Supply Management's (ISM) latest PMI reading has risen for 32 consecutive months. The key index rose to 53.4 in March, up from 52.4 in February. Any reading above 50 indicates growth in the manufacturing sector. In addition, manufacturing attributed to more than 37,000 of the 120,000 new jobs added in the latest jobs report. Overall, the ISM's survey showed improvement in hiring outlooks, production plans and the backlog of orders. This echoed similar findings by Briefing.com.

The recent positive March numbers highlight a continued trend for the sector. According to the Commerce Department, manufacturing's share of the nation's GDP shrank to only 11% during the recent economic turmoil. That is down from around 26% in 1947. However, 2010 saw the biggest yearly gain in more than 50 years, landing at 11.7%. Analysts expect 2011's number, which will be calculated at the end of April, to be even higher.

This industrial renaissance is coming at the expense of increasingly uncompetitive emerging markets. These nations have built their economies by exporting cheap goods to the developed world. However, this growth has now forced companies in a variety of these countries to pay higher wages. China is quickly losing its crown as the "low-cost king."

Additionally, the type of goods built by the U.S. has changed. Like Germany, the manufacturing sector now produces high-tech value-added components. The natural gas boom and subsequent falling prices have also benefited petrochemical and steel producers. Add these to the generalized weaker dollar and you have a recipe for long-term export and manufacturing success.

SEE: Manufacturing And Economic Recovery

Betting On The Boom
For investors, playing the revived industrial boom could be one the better plays going forward into 2012. Analysts expect earnings for the S&P 500 industrial sector to rise 13% this year. That compares to just 9% for the broader index. The Industrial Select Sector SPDR (ARCA:XLI) allows investors to directly bet on the broad indexes sub-sectors. The fund spreads its approximate $3 billion in assets across 63 different holdings, including 3M (NYSE:MMM) and United Technologies (NYSE:UTX). The fund charges a dirt-cheap 0.18% in expenses. For an extra 0.01%, investors can access a wider portfolio via the Vanguard Industrials ETF (NYSE:VIS).

Providing the engines for a variety of mining, oil equipment and other industrial applications, Cummins (NYSE:CMI) has continued to see its star shine over the last two years. The firm has consistently beaten analysts' estimates for the last four quarters, and its partnership with Westport (Nasdaq:WPRT) continues to pay dividends. Shares of Cummins can be had for a P/E ratio of roughly 11.66 and around a 1.4% dividend yield. Similarly, small-engine maker Briggs & Stratton (NYSE:BGG) should do well, as any sort of housing recovery will drive demand for its power equipment engines.

SEE: The Benefits Of ETF Investing

The Bottom Line
With the Institute for Supply Management's PMI index rising for the 32nd month in a row, it's safe to say that the U.S. is experiencing a manufacturing revival. The data continues to get better and long-term trends are in place to keep it going for a while. For investors, that means adding a dose of industrial might. Broad exchange-traded funds like the iShares Dow Jones US Industrials (ARCA:IYJ) or individual firms like Eaton (NYSE:ETN) make great picks.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Aaron Levitt did not own shares in any of the companies mentioned in this article.

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