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Earlier data had pointed to slower growth in manufacturing.


The industrial economy is not only still growing nicely, it is accelerating. The latest data on the trends should be good enough to give lagging industrial stocks a boost.

The Institute for Supply Management Purchasing Managers’ Index—a key gauge of U.S. manufacturing activity—came in at 59.9. Economists were projecting 58.5.

A level above 50 indicates growth. The absolute number is a healthy reading for the sector, but growth had been decelerating in recent months, and slowing growth is never a good thing. The index peaked in March at 64.7 and was above 60 for five consecutive months coming into the July reading.

The August reading increase is the first month over month gain since May. What is more, new orders—a leading indicator of growth for manufacturers—came in at 66.7, up from a reading of 64.9 in July.


Industrial Select Sector SPDR ETF

(ticker: XLI) was down about 0.4% on Wednesday, but was off its lows at midmorning, gaining ground after the PMI number was released. The ETF is up about 18% year to date, similar to comparable gains of the

S&P 500


Dow Jones Industrial Average.

But the Select SPDR is flat over the past three months, while the S&P 500 has gained almost 8%.

The slowing growth that the PMI readings were showing is one reason for the weaker performance. There are other factors at work, though.

That ETF, like many industrial ETFs, includes many sectors that aren’t always correlated with one another over the short run. Aerospace-related stocks, for instance, are down about 5% over the past three months as the rise of the Delta variant of Covid-19 has raised concern about the prospects for travel, and demand for jets.

Shares of companies dealing with electrification and automation, meanwhile, are doing great.

Rockwell Automation

(ROK) stock is up more than 20% over the past three months. Stock in


(ETN), which makes electrical components, is up about 15% over the past three months.

Weighing on the overall result was the subindex measuring manufacturers’ views about the employment situation. Manufacturers are still having trouble getting workers. That might be constraining production. If they can get staff, that would fuel optimism down the road. More labor would mean more production to fill the new orders expected in coming months.

Write to Al Root at allen.root@dowjones.com

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