After a slow fourth quarter, the U.S. economy is gaining momentum with a rise in consumer spending and confidence. The latest upbeat industrial production data made the case even stronger, allaying fears of a recession that roiled the stock market at the start of this year and lowered the chance of an interest rate hike in March.

Industrial Data in Focus

Industrial output climbed 0.9% in January, representing the first increase in five months and the largest gain since November 2014. The robust numbers were credited to a massive blizzard in the Northeastern U.S. that drove demand for heating, resulting in a 5.4% higher output for utilities. Additionally, the manufacturing sector, which accounts for about 75% of the U.S. industrial production, rebounded with a 0.5% gain on increased spending on basics and durable goods like autos and furniture (see: all the Industrials ETFs here).

However, manufacturers will continue to suffer due to a strong dollar, weak global demand and low oil prices. The mining sector, which includes oil and gas drilling, was flat last month after four months of decline. Meanwhile, industrial capacity utilization inched up to 77.1% in January from 76.5% in December, and was above the analyst expectation of 76.7%.

The solid data suggests that the worst might be over for the U.S. factories as most of the manufacturing sectors are unaffected by the weak global trends. Given this, many industrial ETFs and stocks are poised to surge in the coming weeks owing to the recovering fundamentals. Below we highlight some of these.

ETFs

While there are several ETFs available in this space, we have highlighted three funds that have gained over the past one month and are expected to keep up their momentum in the coming months. Further, these funds have a favorable Zacks ETF Rank of 3 or ‘Hold’, suggesting room for upside.

First Trust Industrials/Producer Durables AlphaDEX Fund (FXR – ETF report)

This fund follows the StrataQuant Industrials Index, which uses the AlphaDEX methodology to select stocks from the Russell 1000 Index and ranks them on both growth and value factors. The approach results in a basket of 99 securities, which are widely spread out across components with none holding more than 2.13% of assets. In terms of industrial exposure, machinery takes the top spot with one-fourth share followed by 13.7% held by aerospace & defense. The fund has accumulated $114.3 million in AUM and sees a good trading volume of about 198,000 shares a day. It charges 63 bps in fees per year and gained 6.9% in the trailing one-month period.

Industrial Select Sector SPDR (XLI – ETF report)