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Another Positive Month for the Leading Economic Index

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Part 2
Another Positive Month for the Leading Economic Index PART 2 OF 11

What Does More Manufacturing Activity Mean for the Sector?

Manufacturing activity increases after two months

Manufacturing sector (FXR) activity rose marginally in August. Manufacturing employees’ number of working hours gives some insight into industries’ health. An unchanged or higher number of working hours indicates that a company is expecting sales and demand for its products to continue at the current pace or increase. This data is released by the Bureau of Labor Statistics every month, after its establishment survey.

What Does More Manufacturing Activity Mean for the Sector?

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Average weekly hours improve

According to the latest data, production workers’ average hours rose from 42.0 in July to 42.1 in August. There were no revisions to the previous month’s data. This leading indicator has a major impact on the Conference Board LEI (Leading Economic Index), with a net contribution of 0.07 (or 7%). The increase in hours had a net positive effect of 0.07 on the LEI in August.

Key industries and ETF performance

The largest ETF by market cap in this sector is the SPDR Industrial Select Sector ETF (XLI), which has returned 13.5% so far this year. The sector has picked up in the last month, gaining 5.5%, helped by an uplift in investor sentiment after Trump’s tax cut comments. This sector includes some big names in manufacturing, such as General Electric (GE), Lockheed Martin (LMT), 3M (MMM), Boeing (BA), and United Parcel Service (UPS). In the next part of this series, we’ll analyze how average weekly initial claims have affected the LEI.

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