5 Industrial Stocks To Buy As Manufacturing Activity Rises

Of late, upswing in the U.S. industrial production has been dominating headlines, signaling robust growth in manufacturing activity. The 1.1% rise in industrial production in February has given a new reason to cheer the performance of the industrial products sector considering that it is a significant turnaround from January’s 0.3% decline. The rebound in construction and energy-related activities led to the largest growth in industrial production over the past four months.

Industrial Products Sector on a Comeback Trail  

Over the past few years, the industrial products sector has been affected by various factors, including soft commodity prices, reduced investment in the energy sector, dismal economic conditions in some developed and developing nations, and the Brexit referendum. Notably, oil and gas prices fell to historic lows, which curbed the sector's growth. Further, the sector was marred by supply-chain management issues. However, the sector started to rebound in 2017 on the back of increased infrastructure spending and other growth-friendly policies of the new administration. Rise in manufacturing and mining activity also played a crucial role despite the impact of several hurricanes last year.

Driving Factors in 2018

Strong employment growth is anticipated to support the recovery in the industrial products sector. Solid wage growth and improving GDP are crafting a solid base for consumer spending. One more impetus is easy credit availability, which spurs a rich spending for residential housing and non-residential construction. Further, entry of smarter products and Internet of Things (IoT) fuels growth. Thus, rise in production activity, new orders and inventories remain key growth drivers. Further, the recent U.S. tax reform will drive the sector’s performance.

Upbeat Data Supports Buoyancy

Some fresh statistics released regarding manufacturing activities also instill optimism in the market. The latest report of the Institute for Supply Management (ISM) stated that the Purchasing Managers Index (PMI) was pegged at 60.8% in February, up 1.7% from January.

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Moon Kil Woong 1 year ago Contributor's comment

A lot of the rebound in industrial construction centered around increased military spending which I don't see rising substantially given the way the US deficit is already ballooning. Sadly a trade war will likely make growth slow further and certainly detracts from capital spending until everything is hashed out.