U.S. Manufacturing Best Since 1983: ETFs to Win

U.S. manufacturing activity sprung up in March, recording an index reading of 64.7 from 60.8 in February, in a sign that the worst of the COVID-19 economic crisis is probably over. The ISM Manufacturing PMI for the United States was the highest last month since December 1983. Manufacturing makes up about 11.9% of the U.S. economy.

“Manufacturing performed well for the 10th straight month, with demand, consumption and inputs registering strong growth compared to February. Labor-market difficulties at panelists’ companies and their suppliers persist. End-user lead times (for refilling customers’ inventories) are extending due to very high demand and output restrictions as supply chains continue to recover from COVID-19 impacts,” said Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee.

Out of the 18 manufacturing industries, 17 reported growth in March, while none recorded any contraction. Against this backdrop, below we highlight a few ETF areas that look steady in the upbeat manufacturing environment.

VanEck Vectors Semiconductor ETF (SMH)

The semiconductor sector is sure to gain. Two industries — Computer & Electronic Products and Transportation Equipment — should act as tailwinds. 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 supply chain issues, the future looks bright. Rising consumer confidence and reopening of the academic market would boost the demand for computers and related products even more.

Invesco Dynamic Food & Beverage ETF (PBJ)

The $1,400-stimulus checks, still-low rates, still-cheap energy prices and gradual reopening of economies mean that demand for the Food and Beverage industry will remain high in the coming days, benefiting ETFs like PBJ.

iShares U.S. Basic Materials ETF (IYM)

Both Fabricated Metal Products and Chemical Products reported strong growth in March.The chemical industry takes about 50% of the fund IYM with Specialty Chemicals occupying about 30% share. The industry survey revealed that the demand has been robust. Fabricated Metal Products has also been witnessing solid demand. Raw-material prices are up 50% to 60% over the last six months, with the increases being passed onto the customers, per the industry survey.

Vaneck Vectors Oil Services ETF (OIH)

The surveyed businesses under Petroleum & Coal Products industry said that “the spring and summer months look great for the national oil markets.” The segment is also betting big on the reopening of the global economy.

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VanEck Vectors Oil Services ETF (OIH): ETF Research Reports
 
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