Fresh data from the Institute of Supply Management released on Monday showed that the manufacturing sector is in fine fettle. The institute’s manufacturing index hit a record level in June, well above that observed immediately after the presidential election of 2016. Instead of being based merely on positive sentiment, manufacturing data is now being bolstered by recently released data which hints at a pickup in GDP.

As of date, the ISM Manufacturing index has expanded for 10 successive months with the latest report reflecting broad based improvement across most sectors. The report also reveals that a strong uptick in demand has taken place, which is why it would be prudent to invest in select manufacturing stocks going into the second half of 2017.

Sharpest Growth in Three Years

In June, the ISM Manufacturing Index increased from 54.9 to 57.8, its highest level since August 2014. It is also significantly higher than the estimated level of 55.1. This increase of 2.9 points represents the largest expansion witnessed since the first half of 2013. More importantly, growth was witnessed across 15 of the 18 industries which form part of the survey, indicating that the expansion was broad based in nature.

Delving into the details, the New Orders Index increased from 59.5 in May to 63.5 in June. The Production Index increased from 57.1 to 62.4 while the Employment Index gained 3.7 points, rising from 53.5 to 57.2. The New Export Orders Index increased from 57.5 to 59.5.

An increase in order backlogs was experienced, with the associated index rising from 55 to 57. At the same time the prices index fell from 60.5 to 55, the lowest witnessed since November, indicating that raw materials prices are rising at a slower rate now. 

Economic Growth Likely to Pick Up

Even though manufacturing makes up only 12% of total economic activity, its fortunes are used to gauge those of the broader economy. Given the improvement in the report’s Employment Index, jobs growth likely rebounded last month following a decline in May. Data to be released by the Department of Labor is likely to reflect this fact and most estimates put June’s job gains above 170,000, significantly higher than May’s level of 138,000.