Manufacturing Activity On A High: 4 Industrial Stocks To Buy

The manufacturing sector which accounts for about 12% of the U.S. economy drew the curtains on 2017 with a strong performance, going by the data provided by the Institute for Supply Management (“ISM”). This upbeat performance was driven by a surge in new orders growth, signaling strong economic momentum.

Upbeat Manufacturing Data Instill Optimism

According to ISM, its index of national factory activity surged to a reading of 58.7 in December from 58.2 in November — the second highest reading in six years. The index had hit a peak of 60.8 in September. Notably, a reading above 50 indicates improved factory activity. The average PMI for 2017 was pegged at a promising 57.6. The December PMI indicates growth for the 103nd consecutive month in the overall economy. The sector is in the 16th consecutive month of expansion, with growth noted in 16 of the 18 manufacturing industries.

The New Orders Index, per the ISM, shot up 5.4 points to 69.4 — the highest reading since January 2004, when the index had recorded a 70.6 reading. Further, December marked the seventh consecutive month with a score above 60 — the highest expansion level witnessed in 14 years. The production index was at 65.8 in December, a 1.9 point expansion from November, the highest reading since May 2010.

On a broader note, per the latest data available, industrial production — a measure of the level of output of manufacturing, mining and utilities sectors in a country — increased 3.4% till November, above its year-ago level.

Construction Sector Shows Resilience

Per recent data released by the Commerce Department, total construction spending in the United States was at $1.26 trillion — an all-time high. Construction spending rose 0.8% in November on a sequential basis and 2.4% on a year-on-year basis. Spending on private residential projects improved 1% in November from October levels and also hit the highest level since February 2007. Residential construction improved 1% while non-residential construction went up 0.9%, both compared with October. Outlays on public construction projects rose 0.2% in November from October.

The construction sector has demonstrated stability through 2017 and witnessed sustainable growth amid various challenges. It goes without saying that President Donald Trump was the biggest factor. Investors were expecting faster growth based on Trump’s assurance of significant tax cuts, higher infrastructure spending and lesser regulations.