5 Industry ETFs Defying Soft November Manufacturing Data

The Institute for Supply Management (ISM) said on Dec 1 that its index of national factory activity rose to a reading of 57.5 last month from 59.3 in October (which had been the highest since November 2018). The data also fell shy of the economists’ estimate of 58.0 polled by Reuters. A reading above 50 indicates expansion in manufacturing, which makes up about 11.3% of the U.S. economy.

The latest decline in manufacturing activity can be attributed to the rise in virus cases in the United States. Manufacturing output is still about 5% lower than its pre-pandemic level, according to the Federal Reserve. New orders backtracked from their highest level in nearly 17 years in November.

Of the 18 manufacturing industries, 16 reported growth in November. The winning industries are Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Textile Mills; Wood Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Plastics & Rubber Products; Primary Metals; Chemical Products; Machinery; Computer & Electronic Products; Paper Products; Miscellaneous Manufacturing; Transportation Equipment; Furniture & Related Products; and Food, Beverage & Tobacco Products.

Against this backdrop, below we highlight a few sectors and the related ETFs that emerged winners in the month of November.

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. This clearly points to an upbeat outlook. The fund has increased 22% past month.

Food & Beverage – Invesco Dynamic Food & Beverage ETF PBJ

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, “cost of goods sold is much higher than normal due to labor and production inefficiencies,” per respondents. The fund PBJ thus added a decent 8.7% past month.

Chemicals – iShares U.S. Basic Materials ETF IYM

The survey on the chemical products industry revealed that business is in solid state with production issues for petrochemicals normalizing after a very active hurricane season, as indicated by the survey. Overall, decent demand for chemicals ensures the rally in materials stocks. The fund IYM has jumped 14.2% past month.

Wood Products – iShares Global Timber & Forestry ETF WOOD

Timber-related exchange traded funds have been on solid momentum as lumber prices are rising. A solid housing market is acting as a huge source of demand for lumber. Solid demand for home-furnishing goods will also make the wood products market red hot. The fund WOOD has added 15.9% past month.

Apparel – SPDR S&P Retail ETF XRT

The U.S. apparel sales continued to recover from the pandemic-induced lockdown. The XRT fund puts about 17.78% weight in the apparel segment. XRT has gained 21.8% past month.

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SPDR S&P Retail ETF (XRT): ETF Research Reports
VanEck Vectors Semiconductor ETF (SMH): ETF Research Reports
iShares Global Timber & Forestry ETF (WOOD): ETF Research Reports
Invesco Dynamic Food & Beverage ETF (PBJ): ETF Research Reports
iShares U.S. Basic Materials ETF (IYM): ETF Research Reports
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