Flying in the face of negative economic news, U.S. factories picked up steam for the third straight month in November. The preliminary manufacturing purchasing manager’s index (PMI), a leading indicator we closely track here at U.S. Global Investors, pulled further away from its August low with a reading of 52.2 this month. That’s up from 51.3 in October and marks a seven-month high.
Remember, investors are better served when they follow the trend lines, not the headlines.
A raft of economic reports on Friday welcomed the turnaround:
Chris Williamson, chief economist at IHS Markit—which releases the monthly PMI—wrote that the November reading “adds to evidence that the worst of the economy’s recent soft patch may be behind us.”
Responding to the manufacturing uptrend, Renaissance Macro’s head of economics, Neil Dutta, urged investors to “look for construction activity to rise.”
“Today’s improvement,” wrote Cornerstone Macro’s Nancy Lazar, “shows U.S. manufacturing is recovering as trade uncertainty recedes.”
Finally, Stan Shipley at Evercore ISI said that Friday’s improved PMI and consumer sentiment releases “suggest solid employment and consumer spending will pull the manufacturing sector higher rather than the manufacturing sector dragging the overall economy lower.”
Taken together, this is all very constructive not just for manufacturers but also exporters, container shipping companies and cargo airlines, not to mention the energy, materials and financial sectors.
The Boeing Co., for instance, announced a bump in orders for its still-grounded 737 MAX aircraft. Following this year’s Dubai Airshow, the world’s largest aerospace event, Boeing reported that Kazakhstan’s Air Astana had committed itself to as many as 30 MAX jets, while an undisclosed buyer ordered 20. This comes after SunExpress, a Turkish leisure carrier, purchased 10, bringing the total value of MAX sales to $7.5 billion.
Negative headlines may get the clicks, but savvy investors who can look past those headlines and follow the money often get the rewards.