Continued Growth in Industrial Production: Buy Industrials ETFs
Production levels at U.S. factories rose for the third straight month in September, driven by growth in manufacturing activity, which has been bolstered by higher demand for consumer goods. Steady growth in industrial production and output also indicates that the manufacturing sector still hasn’t crumbled in the face of soaring inflation. This proves that the economy is still on decent ground and that higher demand is helping boost production at American factories.
The Fed said on Oct 18 that industrial production rose 0.4% in September, beating analysts’ expectations of a rise of 0.1%. Industrial production has now increased for three consecutive months, indicating that higher demand for consumer durables is helping boost manufacturing activity at U.S. factories.
The better-than-expected jump in industrial production came as manufacturing output jumped a solid 0.4% in September, matching the increase witnessed in August. The Fed said that mining activity also increased a solid 0.6% in September. Besides, capacity utilization in U.S. industries also advanced to 80.3% last month from an upwardly revised 80.1% in August.
Paul Ashworth, Chief North America Economist at Capital Economics, said, “The 0.4% month-over-month gain in manufacturing output in September, together with some modest upward revisions to previous months, suggests that the factory sector is just about holding up despite the deterioration in the global manufacturing outlook - particularly in China and Europe.”
Despite months of supply-chain pressures and increased input costs, the sector has been able to overcome the difficulties. Also, higher crude oil prices have prompted gasoline costs to hit record highs, which are driving the output at mines.
Against this backdrop, below we highlight a few industrials ETFs that are worth a look. These ETFs outperformed the S&P 500 past month (down 2.5%).
ETFs in Focus
Invesco S&P SmallCap Industrials ETF PSCI
The underlying S&P SmallCap 600 Capped Industrials Index measures the overall performance of the securities of US industrial companies which are principally engaged in the business of providing industrial products and services, including engineering, heavy machinery, construction, electrical equipment, aerospace and defense and general manufacturing. The fund charges 29 bps in fees. The fund added 3.3% past month (as of Oct 19, 2022).
First Trust RBA American Industrial Renaissance ETF AIRR
The underlying Richard Bernstein Advisors American Industrial Renaissance Index is measures the performance of small and mid cap US companies in the industrial and community banking sectors. The fund charges 70 bps in fees and has added 2.1% past month.
Emles Made In America ETF AMER
The underlying Emles American Manufacturing Index is designed to provide exposure to U.S. equities, predominantly companies headquartered and focused on the production of goods within the U.S. The fund charges 49 bps in fees and yields about 4.69% annually. The fund is up 0.1% past month.
Industrial Select Sector SPDR ETF XLI
The underlying Industrial Select Sector Index includes companies from the following industries: industrial conglomerates; aerospace & defense; machinery; air freight & logistics; road & rail; commercial services & supplies; electrical equipment; construction & engineering; building products; airlines; and trading companies & distributors. The fund charges 10 bps in fees. The Zacks ETF Rank #2 (Buy) fund is down 0.1% past month.
Vanguard Industrials ETF VIS
The underlying MSCI US Investable Market Index (IMI)/Industrials 25/50 is made up of stocks of large, mid-size, and small U.S. companies within the industrials sector. The fund charges 10 bps in fees. The Zacks ETF Rank #3 (Hold) fund is down 0.4% past month.
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Vanguard Industrials ETF (VIS): ETF Research Reports
Industrial Select Sector SPDR ETF (XLI): ETF Research Reports
First Trust RBA American Industrial Renaissance ETF (AIRR): ETF Research Reports
Invesco S&P SmallCap Industrials ETF (PSCI): ETF Research Reports
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