5 Promising Industrial Stocks Set To Soar In H2
Zacks Investment Research | Jul 05, 2019 08:36AM ET
Despite the ongoing U.S.-China trade turbulence and concerns regarding the global economy, the U.S. manufacturing sector has held its ground and managed to deliver persistent growth for 34 straight months.
Per the Institute for Supply Management’s latest report, Purchasing Managers’ Index (PMI) for June came down to 51.7% from 52.1% registered in May but surpassed the estimate of 51.3. Even though it has dipped from May, it remains above 50 – which indicate expansion in the sector. Further, the PMI has averaged 56% over the last 12 months.
The New Orders Index registered 50.0% in June, down from 52.7% in May. The sector witnessed a decline after experiencing growth for 41 straight months. Backlog of Orders Index was at 47.4% in June, which is 0.2 percentage point higher than the 47.2% reported in May – which was the lowest level of performance since October 2016. Order backlogs contracted for a second consecutive month, but at a slower rate in June. Production Index was 54.1% in the month, up from 51.3% in May and continues to improve for 34 straight months. The employment index was pegged at 54.5%, up from the May reading of 53.7%. This marked growth for the 33rd consecutive month.
Per IHS Markit, US Manufacturing PMI was 50.6 in June 2019, a tad higher than May's final 50.5. Still it was the second-lowest figure since September 2009.
Nonetheless, the truce in trade war is likely to lift the industrial sector. Further, a possible rate cut by the Fed in July in order to sustain U.S. economic expansion will act as a tailwind. A drop in interest rate will reduce the cost of funds thereby bolstering investments in the manufacturing sector.
The industrial sector seems well poised to sustain the momentum this year as well, supported by improvement in its end markets like residential and non-residential construction; mining driven by ongoing recovery in the commodities, oil and gas industry; and overall economic growth. Further, manufacturers have increased capital spending and hiring driven by massive tax overhaul, deregulatory measures and strong domestic economy.
Sector Performance
Despite the above-mentioned headwinds, the Zacks Zacks Investment Research
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