Industrial production bounced back last month after two consecutive months of decline, following an increase in factory production. The rebound sustained the flow of encouraging economic data in September. Decline in the impact of hurricanes Harvey and Irma in September and recovery in utilities and construction gave a boost to last month’s industrial output.

Given these positive trends, the addition of mutual funds that have significant exposure to the industrials sector could be a suitable investment option. Now, we will take a glance at the encouraging data that raised hopes for the industrials sector for the coming months.

Industrial Production Rebounds

Industrial production in September bounced back after forgettable July and August performances. The Board of Governors of the Federal Reserve System reported that industrial production increased 0.3% in September, in contrast to a decrease of 0.7% in August. It also exceeded the consensus expectation of a 0.1% increase and advanced at an annual rate of 1.6% year over year.

Also, capacity utilization advanced from 75.8% to 76 % last month. Although capacity utilization remained below its long-run (1972–2016) average by 3.9%, it posted growth of 1.1% in the last one year. Moreover, with recent economic data like ISM Manufacturing Index and new orders remaining upbeat, it is expected that economy will be able to expand its capacity gradually. 

Encouraging Industry Groups’ Data

After weak results in the prior two months, manufacturing output rose 0.1% in September. Although non-durable output posted a decline, durables registered a rise of 1%. In durables, nonmetallic mineral products, and machinery and electrical appliances together saw a gain of 3%. In non-durables, only plastics and rubber products and indexes for food, beverage, and tobacco products increased.

Also, in market groups, a rebound in both consumer durables and non-durables drove consumer goods output by 0.5% in September. Further, business equipment increased 0.8%, while business supplies and construction supplies recorded gains of 0.6% and 1.9%, respectively.