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U.S. Manufacturing Points to a Recovery: 5 Winning ETF Areas

Sanghamitra Saha
·3 min read

U.S. manufacturing activity recovered from an 11-year low in May, in a sign that the worst of COVID-19 economic crisis is probably over. The ISM Manufacturing PMI for the United States increased to 43.1 in May from 41.5 in April, which was the lowest reading since April 2009.

However, figures came shy of forecasts of 43.6 and still indicate a sharp contraction in the manufacturing sector. A reading below 50 indicates contraction in manufacturing, which makes up about 11% of the U.S. economy, per Reuters. The ISM’s forward-looking new orders’ sub-index rose to a reading of 31.8 in May from 27.1 in April, which was the lowest since December 2008.

Out of the 18 manufacturing industries, six reported growth in May. The winning industries are Nonmetallic Mineral Products; Furniture & Related Products; Apparel, Leather & Allied Products; Food, Beverage & Tobacco Products; Paper Products; and Wood Products.

Against this backdrop, below we highlight a few ETF areas that look steady in a still-lackluster manufacturing industry.

Computer & Electronic Products – VanEck Vectors Semiconductor ETF SMH

The computer and peripherals space has been a COVID-19 winner due to the prevailing work-and-learn-from-home culture. A Computer & Electronic Products industry survey showed that despite the COVID-19 issues, there has been a rise in quoting activity. Though the move has not replicated into orders yet, it clearly points to an upbeat outlook. The fund increased 5.3% past month.

Food & Beverage Invesco Dynamic Food & Beverage ETF PBJ

The survey in the segment revealed that higher COVID-19 sales in the food business “stressed production capabilities.” It means demand for food and beverage will remain in the sweet spot in the coming days, benefiting ETFs like PBJ. The fund added 7.5% past month.

EnergyVaneck Vectors Oil Services ETF OIH

After crashing in mid-April, oil prices recovered in May on an improved demand outlook based on the reopening of economies. In fact, WTI crude oil spiked 88% in May, marking its best monthly performance since 1983, according to data from Bloomberg.The survey done on the Petroleum & Coal Products industry also forecasts higher demand on reopening of the global economy. The fund advanced 18.6% past month.

MetalInvesco DB Base Metals Fund DBB

The survey done in the Primary Metals industry indicated that most of its customer base is considered part of the critical workforce. So, the industry has been running at around 80% production volume level. The fund added 5.3% past month.

Wood ProductsiShares Global Timber & Forestry ETF WOOD

Timber-related exchange traded funds have been on solid momentum as lumber futures jumped since the start of April due to production cutbacks at mills. On the other hand, the homebuilding sector has been showing sign of improvement as has demand for home-furnishing goods. With the housing industry looking to stage a V-Shaped recovery in the coming days, WOOD may continue to gain. The fund WOOD added 9.2% past month.

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VanEck Vectors Semiconductor ETF (SMH): ETF Research Reports
 
VanEck Vectors Oil Services ETF (OIH): ETF Research Reports
 
iShares Global Timber Forestry ETF (WOOD): ETF Research Reports
 
Invesco DB Base Metals ETF (DBB): ETF Research Reports
 
Invesco Dynamic Food Beverage ETF (PBJ): ETF Research Reports
 
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