Industrial Production Revives In November: 5 Promising Picks
Zacks Investment Research | Dec 17, 2019 10:02PM ET
Industrial production in the United States rebounded sharply in November 2019, as revealed in the recently released data by the Federal Reserve. The metric has gained 1.1% over the past month, marking the biggest improvement since October 2017.
The news is a healthy sign for manufacturing companies, which have been struggling with macro and micro issues of late.
Global uncertainties (including those related to Brexit), forex woes and trade tensions between the United States and China have been taking a toll on manufacturing companies. Notably, the tariff issues have hurt corporate margins in the past quarters. Also, cost-inflationary pressure, rising freight charges and others have added to the woes.
Reasons Behind Revival in Industrial Production
The Federal Reserve’s report shows that 1.1% month-over-month gain in industrial production came in after two successive months of decline. The manufacturing sector in the month gained 1.1%, mainly driven by rise in motor vehicles and parts that resulted from the end of the strike at General Motors Company’s (NYSE:GM) factories.
Also, excluding the impact of motor vehicles and parts, manufacturing output in November increased 0.3%, and the overall industrial production grew 0.5%.
In addition, output of the utilities sector has improved 2.9% over the past month, while that for mining has decreased 0.2% due to a fall in drilling and other activities in the oil & gas industry.
In November, capacity utilization for the manufacturing sector was up 0.7 percentage point, and for utilities increased 2.1 percentage points, while that for mining declined 0.2 percentage point.
5 Promising Manufacturing Stocks
We believe that healthy industrial production data along with growth in housing starts in November (with 3.2% month-over-month gain and 13.6% year-over-year growth) and more job additions (with a fall of 10 basis points in the unemployment rate to 3.5% to November 2019) are good signs for the manufacturing sector.
Also, the U.S. government’s emphasis on infrastructure development, impetus to streamline business regulations and corporate tax overhaul will continue to be tailwinds. Further, the government’s efforts to lower tariff-related woes by reaching a phase-one trade deal with China will likely bode well.
We have picked five top-ranked manufacturing stocks that are likely to enhance your portfolio.
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