U.S. Manufacturing Growth Slows. But Investors Are Buying GE, Eaton, and Other Industrial Stocks.

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Manufacturing growth slowed in July. Things are the slowest they’ve been since mid-2020.

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Manufacturing growth slowed in July. Investors don’t seem to care. They have been snapping up shares of cyclical industrial stocks anyway, betting on a growth rebound.

The Institute for Supply Management’s Purchasing Manager Index, a key gauge of U.S. manufacturing activity, was 52.8 for July. A level above 50 indicates growth for the sector, but the latest reading was from 53 in June and down from where it started the year at a level of about 58.

What’s more, the new order and employment indexes came in below 50. It’s a sign things that things are slowing down.

“The U.S. manufacturing sector continues expanding — though slightly less so in July,” said PMI survey chair Tim Fiore in a news release. “This is the lowest Manufacturing PMI figure since June 2020, when it registered 52.4.”

Fiore did add that survey respondents are still optimistic about demand with six positive comments to every one negative comment.

Investors seem to have been ready for the slowdown, believing that the bottom in stock prices is near. Industrial stocks in the S&P 500 were trading close to flat on the day, and the shares are up about 10% on average over the past two weeks.

Several shares have done much better. General Electric (ticker: GE) stock has risen almost 20% over the past couple of weeks. Shares were up again Monday, about 1.5%, If GE stock closes higher it will be tits 12th consecutive close higher.

Shares of industrial distributor Grainger (GWW) have jumped about 18% over the same span. Distributor shares are often considered early cycle by investors. They do best early in a period of economic expansion when growth is accelerating.

Other examples of big gains over the past couple of weeks include shares of electrical distributor Wesco International (WCC) and electrical components maker Eaton (ETN). Those stocks have gained about 22% and 15%, respectively.

The stock market is always forward-looking. Investors aren’t really concerned with July numbers anymore. But they are betting on things picking up from here. Time will tell if investors are correct.

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