A longstanding investing maxim holds that “the U.S. consumer accounts for two-thirds of the U.S. economy.” It’s never clear how that math works out, but consumer spending is undeniably important.

#-ad_banner-#Yet investors should never overlook the impact of corporate spending. Business investments in plants, equipment and many other long-term assets that fall under the label capital expenditures are a crucial component of economic activity. Ford Motor Co. (NYSE: F) and General Motors Co. (NYSE: GM), for example, spent a combined $16 billion on capital expenditures last year.

In just the past few months, even as the consumer portion of the U.S. economy has remained in a funk, corporate spending is starting to move higher. And once the process starts, a virtuous cycle kicks in whereby the providers of capital goods, as they see new orders come in, need to boost their own levels of spending on long-term assets to meet demand. That spending, in turn, then spreads to an ever broader base of smaller suppliers.

Pivot from buybacks and dividends

Over the past few years, we have noted how a wide range of companies have earmarked their cash flow for share buybacks and dividend hikes. Meanwhile, they have under-invested in long-term assets. As a result, the average age of industrial equipment in the United States has risen to more than 10 years old. That’s the highest level in the post-World War II era, according to an analysis by Morgan Stanley.

Of course, companies can only skimp on capital expenditures for so long. As they receive more orders, their existing slate of equipment starts to get over-worked. Historically speaking, companies start to more aggressively invest in long-term assets when the Capacity Utilization Index approaches 80%. If they wait too long, then production bottlenecks occur, which can trigger a drop in productivity and spike in inflation. Capacity Utilization is a measure of actual output produced compared against the maximum potential output a company can produce.

That index, after bottoming out at 66.9% in 2009, has been rising ever since and is shifting from the green zone into the yellow zone. In just the past six months, this metric has risen by more than a percentage point. It is now at its highest level since the second quarter of 2008.

It appears as if companies are taking note of this issue. Spending on business equipment rose 8.6% in the second quarter, compared to a year earlier, according to research firm Macroeconomic Advisers. That figure may exceed 10% in the third quarter, according to Morgan Stanley.

One more key data point: The Institute for Supply Management’s (ISM) Purchasing Managers Index recently spiked to 59.0, the best showing in more than three years. The Purchasing Managers Index is regarded a gauge of the health of the manufacturing sector. As Joel Naroff, a private economist told the Wall Street Journal, “These ISM numbers are about as good as it gets. It’s hard to make the argument that this economy is not accelerating.”

Unless we get a fresh economic setback, the upturn in capital expenditures could extend into the next few years — if not longer. Again, the nation’s capital stock is aging, and billions need to be spent to modernize plants and equipment. That should set the stage for sustained growth among industrial firms. From Caterpillar, Inc. (NYSE: CAT) to Honeywell International, Inc. (NYSE: HON) to Johnson Controls, Inc. (NYSE: JCI) and so many other firms, the macroeconomic backdrop will only get better. This is a great time to focus on areas of capital expenditure strength and identify which types of firms will see the most robust demand in coming quarters and years.

Investors may also want to seek out the exchange-traded fund (ETF) route. Industrial ETFs allow you to invest in the broader theme while avoiding the challenge of identifying just one or two beneficiaries of rising corporate spending. My favorite industrial ETFs include:

— Vanguard Industrials Index Fund (NYSE: VIS). This ETF, which counts General Electric Co. (NYSE: GE), United Technologies Corp. (NYSE: UTX) and Union Pacific Corp. (NYSE: UNP) as its top three holdings, is similar in its construction to other popular industrial ETFs, such as the SPDR Industrial Select Sector SPDR ETF (NYSE: XLI) and the iShares U.S. Industrial Sector Index Fund (NYSE: NYSE: IYJ). The Vanguard fund gets the nod, in part because it has a rock-bottom 0.14% expense ratio.

— PowerShares DWA Industrial Momentum Portfolio (NYSE: PRN). If you’re a subscriber to StreetAuthority’s Maximum Profit newsletter, then you know we’re fans of using relative strength as a key gauge for trading entry points. This ETF, which has the added benefit of focusing roughly 60% of its assets on small and mid-cap industrial firms, is also a fan of relative strength. That focus and approach has delivered a roughly 20% annualized gain over the past five years, according to Morningstar. Considering the capital expenditure surge should spread to small and mid-sized manufacturers, then this ETF appears poised for continued strong gains.

Risks to Consider: U.S. manufacturers are more exposed to international markets than ever. They have weathered the troubles in Europe and elsewhere thus far, but a deepening global economic slowdown might blunt the recent momentum seen in this sector.

Action to Take –> The recent upturn in the manufacturing sector is still on tenuous footing, so don’t think of this theme in the context of short-term investing. Instead, think of industrial stocks in a larger context, as key beneficiaries of multi-year growth opportunities. Our nation’s industrial firms have never been as lean as they are now, and an upturn in sales should lead to robust cash flow in coming years. When Europe and the rest of the world start to generate a higher level of economic activity, the U.S. manufacturers just might enter into a golden era of growth and profits.

As I mentioned earlier, the manufacturing sector is forecasted to experience strong upward momentum if current factors hold steady. My colleagues Jimmy Butts and Brad Briggs use the Maximum Profit strategy to identify stocks with a relative strength greater than 70% of the broader market and a growing cash flow. That equates to investments that returned 30% in five months… nearly 40% in ten months… and even 181% in just over a year. Once those stocks begin to lose momentum, the Maximum Profit system signals that the stock should be sold. To gain access to the Maximum Profit system, including two free reports, click here.