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4 ETF Areas to Play Upbeat Manufacturing Data

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The Institute for Supply Management (ISM) said on Dec 1 that its index of national factory activity rose to a reading of 61.1 last month from 60.8 in October. The data beat the economists’ estimate of 61.0 polled by Reuters by a whisker. A reading above 50 indicates expansion in manufacturing, which makes up about 12% of the U.S. economy.

The moderate performance of the manufacturing sector can be attributed to the rise in virus cases globally and the resultant supply chain woes. There were prolonged shortages of critical lowest-tier materials, high commodity prices and difficulties in transporting products. The demand scenario, labor and supplier delivery showed improvement, per Timothy Fiore, ISM chair of the manufacturing business survey committee.

Of the 18 manufacturing industries, 13 reported growth in November. The winning industries are Apparel, Leather & Allied Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Machinery; Plastics & Rubber Products; Paper Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Chemical Products; Petroleum & Coal Products; Fabricated Metal Products; and Transportation Equipment.

Against this backdrop, below we highlight a few sectors and the related ETFs that emerged winners in the month of November. SPDR S&P Retail ETF (XRT - Free Report) , iShares U.S. Basic Materials ETF (IYM - Free Report) , Invesco Dynamic Food & Beverage ETF (PBJ - Free Report) and VanEck Vectors Semiconductor ETF (SMH - Free Report) are some of the ETFs that should catch investors’ attention.

Apparel – SPDR S&P Retail ETF (XRT - Free Report)

The U.S. apparel sales continued to recover from the pandemic-induced lockdown. The XRT fund puts about 20% weight in the apparel segment.

Chemicals – iShares U.S. Basic Materials ETF (IYM - Free Report)

The survey on the chemical products industry revealed that business is in solid state with petrochemical supply chain slowly showing signs of improvement after several weather disruptions in 2021. Overall, decent demand for chemicals ensures the rally in materials stocks.

Food & Beverage – Invesco Dynamic Food & Beverage ETF (PBJ - Free Report)

Demand for food and beverage should remain in the sweet spot in the coming days as these are necessary items and less ruffled by economic weakness. However, even though demand remains high, “all input costs are going up considerably, across the board,” per respondents.

Computer & Electronic Products – VanEck Vectors Semiconductor ETF (SMH - Free Report)

The computer and peripherals space has been a COVID-19 winner due to the prevailing work-and-learn-from-home culture. This clearly points to an upbeat outlook. The survey from the Computer & Electronic Products segment revealed that “international component shortages continue to cause delays in completing customer orders. Backlog continues to increase.” This shows strong demand for chips.


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