Manufacturing Is Leading the Whole Economy

Bloomberg -- "Once-ailing manufacturers are enjoying a robust rebound as cost-saving moves from job cuts to a greater reliance on technology help drive stronger-than-forecast growth. The shift has helped set the stage for a potential “manufacturing renaissance,” says James Paulsen, chief investment strategist at Minneapolis-based Wells Capital Management. He predicts the industry will set the pace for U.S. expansion and the American stock market during this decade, as technology did in the 1990s.

“Manufacturing is leading the whole economy,” said Paulsen, whose firm oversees about $340 billion. U.S. manufacturers “had to find religion. They’ve really cleaned up their balance sheets. What is left is the cream of the crop.” 

Investors’ confidence in the industry is evident in the Industrial Select Sector SPDR Fund (XLI), an exchange-traded fund made up mostly of manufacturers including Peoria, Illinois-based Caterpillar Inc. (CAT) and Boeing Co. (BA) in Chicago. The fund has climbed 37 percent since Dec. 31, 2009, compared with a 20 percent rise in the Standard and Poor’s 500 Index (see chart above, click to enlarge)."