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ETF Specialist

An ETF for a Stronger Manufacturing Sector

Slowly and steadily, industrial demand is continuing unabated, both in the U.S. and, surprisingly, in Europe.

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Morningstar's Take
The United States industrials sector continues to benefit from a slow and steady expansion. In November 2013, the manufacturing ISM report showed growing economic activity in the manufacturing sector for the sixth consecutive month, with across-the-board strength. The headline number is the manufacturing Purchasing Managers' Index number, which hit 57.3 in November, a gain from October's reading of 56.4 and its highest level in the past year. (Any reading above 50 indicates that the manufacturing economy is generally expanding.) And over the past 12 months, the PMI figure has been above 50 for all but one month.

We would caution investors from taking too much away from any one-month (or even two-month) reading. The reason is that if the 57.3 PMI for November is annualized, it would correspond to a 4.7% increase in real GDP. That's a level at which few believe the U.S. economy is capable of growing anytime soon. However, even averaging monthly PMI figures across the past 12 months results in a robust reading of 53.4.

Robert Goldsborough does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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