Companies in the business services sector, including management consulting and legal services, continue to grow, reflecting trends in the broader economy. No surprise there. But new data shows mid-size manufacturers — long considered past their prime to overseas pressures — are still going strong in the U.S. economy.
"You find your niche and run away from the commodity business," said Dale "Mac" McIntosh, owner of Custom Powder Systems. Based in Springfield, Missouri, the 100-employee operation specializes in manufacturing equipment that's used for dispensing, sizing and blending dry powders for pharmaceutical and food companies. They create containers and workflows that eventually result in final products, including Pepperidge Farm crackers and tiny Advils.
"We are the precursor to all packages," said McIntosh, who's been running Custom Powder Systems for 10 years and counting. "We're a leader in a small, niche industry." Their client roster of Fortune 500 companies straddle biotech, pharmaceuticals and the food business.
Business, of course, has improved since the depths of the financial crisis. McIntosh decided to bypass layoffs at the time, but that decision came at a price. "That cost us $1 million in 2009," he said. "It was difficult."
Years later, with a broader economic recovery, the rate of growth in business services is outpacing traditional sectors. But manufacturing and wholesale trade continue to be key industries among U.S. companies with revenues between $10 million and $1 billion annually. That's according to data released last week from American Express and Dun & Bradstreet. The companies studied were larger than mom-and-pops but not yet full-fledged multinationals, and are sometimes referred to as middle-market companies.
"Manufacturing is still one of the top sectors," said Julie Weeks, research advisor at American Express. She authored the middle market report. "Manufacturing is still important."
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More than half of the middle-market companies, detailed in the report, straddled four sectors: manufacturing at 17 percent, wholesale trade at 13 percent, retail trade at 12 percent and business services at 12 percent. Business services included companies ranging from advertising agencies to architecture firms.
The report also found more younger middle market companies in business services fields, including interior design and public relations. The data shows which industries millennial entrepreneurs are choosing.
"While manufacturing continues to be a critical piece of our economy, we are moving to a technologically advanced service economy and these younger middle market firms are both driving growth and, importantly, creating significant numbers of new jobs," said Jeff Stibel, vice chairman of Dun & Bradstreet, in prepared remarks.
Back in Missouri, Custom Powder Systems is busy growing and shipping a large container system to China. "They don't have the resources to do it there," business owner McIntosh said.
Earlier this year, global stock markets were hit by data showing slower growth in China, the world's second-largest economy. While China's growth engine certainly is weaker, the investment case for China — and its nearly 1.4 billion people, driving sales and profits for companies — remains intact.
"It's easy to connect the dots and say, 'This is a collapse in the overall Chinese economy and consumption,' " China expert Jeff Walters said last month. "It's not," added Walters, a Hong Kong-based partner at the Boston Consulting Group.
And again, specializing can fuel business longevity, despite overseas pressures. "Don't be a commodity business," said McIntosh. "It's impossible to compete with the Chinas and Indias" in that regard.
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