3 Sector ETFs to Win Room for Soft Manufacturing Data – July 5, 2022


The ISM Manufacturing PMI in the United States declined to 53.0 in June of 2022 from 56.1 in May, falling shy of market forecasts of 54.9. The reading marked the weakest growth in factory activity since June 2020.

New orders shrank for the first time in two years (49.2 vs 55.1), in a sign rising interest rates are hurting demand. Also, employment declined further (47.3 vs 49.6) although companies improved their progress on addressing moderate-term labor shortages at all tiers of the supply chain.

At the same time, supplier deliveries slowed (57.3 vs 65.7) while production (54.9 vs 54.2) and inventories (56 vs 55.9) increased slightly faster and price pressures eased (78.5 vs 82.2). Though business sentiment remained optimism regarding demand, supply chain and pricing issues continue to play foul.

Out of the 18 manufacturing industries, 15 reported growth in May, while three recorded contraction. Against this backdrop, below we highlight a few ETF areas that look steady.

Transportation – iShares US Transportation ETF IYT

The industry survey revealed that there is a continued strong demand for transportation equipment. The underlying S&P Transportation Select Industry FMC Capped Index (USD) measures the performance of companies from the Industrial Transportation, Airline and General Industrial Services industries of the US equity market. The fund charges 41 bps in fees.

Food & Beverage – Invesco Dynamic Food & Beverage ETF (PBJ Free Report

The industry survey for Food, Beverage & Tobacco Products revealed that “business is slower than expected in volume, but revenue is on pace with [companies’] budget. Ocean freight costs are finally beginning to fall a bit. [Companies] are already receiving large orders for the fall, which is encouraging.”

The underlying Dynamic Food & Beverage Intellidex Index is comprised of stocks of 30 US food and beverage companies. These are companies that are principally engaged in the manufacture, sale or distribution of food and beverage products, agricultural products and products related to the development of new food technologies. The fund charges 63 bps in fees.

Fabricated Metal Products – SPDR S&P Metals & Mining ETF (XME Free Report

Fabricated Metal Products industry survey revealed that “business is still steady. Some customers are pushing orders out because they have too much inventory. [Metal companies] are able to backfill the pushed orders from customers that want theirs earlier, so [companies] aren’t losing capacity.”

The underlying S&P Metals & Mining Select Industry Index represents the metals and mining sub-industry portion of the S&P Total Market Index. The S&P TMI tracks all the US common stocks listed on the NYSE, American Stock Exchange, NASDAQ National Market and the NASDAQ Small Cap exchanges. The Metals & Mining Index is a modified equal weight index.

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