What is the 'Industrial Goods Sector'

The industrial goods sector is a category of stocks that relates to producing goods used in construction and manufacturing. This sector includes companies involved with aerospace and defense, industrial machinery, tools, lumber production, construction, waste management, manufactured housing, cement and metal fabrication. Performance in the industrial goods sector is largely driven by supply and demand for building construction, such as residential, commercial and industrial, as well as the demand for manufactured products.

BREAKING DOWN 'Industrial Goods Sector'

When the economy contracts and consumers save more and spend less, activity in this sector drops because companies postpone expansion and produce fewer goods. With the industry covering a wide range of subsectors, there is usually at least one area of growth in the industrial goods sector. Many of the subsectors go through bullish growth cycles lasting for years before seeing a retraction. Examples of this are aerospace and homebuilding. Other areas such as industrial conglomerates and waste management have provided steady streams of revenue generation.

Industrial Goods Cycle

The industrial goods sector goes through life cycles that see different subsectors in growth phases. The major stages of the growth cycle are accelerating growth, decelerating growth, accelerating decline and decelerating decline. Investors do well paying attention to the industry trends and position of the growth cycle. Companies in the accelerating growth and decelerating decline phases have the best performance and are given higher multiples due to their upcoming growth.

Tracking Industrial Goods Statistics

The Bureau of Labor Statistics (BLS) is a valuable resource to investors and analysts for sectors. The industrial goods sector is listed as a whole and broken down by subsector in reports. The BLS provides information such as employment, union membership, growth projections, hourly wages and fatalities/injuries. The statistics can be interpreted and used to find growth cycles by investors.

Large Industrial Goods Companies

Some of the largest companies in the United States are placed in the industrial goods sector. General Electric ranked 11th on the 2015 Fortune 500 list of top revenue-producing companies with $140.4 billion. It has been a staple on the Fortune 500, making the top 10 every year since 1995 until it fell to 11th in 2015.

Ways to Invest in Industrial Goods

The MSCI U.S. Industrials Index is the common benchmark for the industry. This index has gained an average of 10.5% annually from 2010 to 2015. Investors can invest in individual industrial goods stocks or look to mutual funds and exchange-traded funds (ETFs). There are fund offerings that cover the entire industrial goods sector and some that cover subsectors of the industry such as aerospace. The Industrials Select SPDR Fund and Vanguard Industrials ETF are two of the largest funds. The ETFs were founded in 1998 and 2004, respectively.

RELATED TERMS
  1. Capital Goods Sector

    A category of stocks related to the manufacture or distribution ...
  2. Growth Industry

    A sector of the economy experiencing a higher-than-average growth ...
  3. Sector

    1. An area of the economy in which businesses share the same ...
  4. Mature Industry

    An industry which has passed both the emerging and the growth ...
  5. Consumer Goods Sector

    A category of stocks and companies that relate to items purchased ...
  6. Service Sector

    The portion of the economy that produces intangible goods. According ...
Related Articles
  1. Investing

    3 Popular Industrials ETFs in 2016 (XLI, VIS)

    Compare the performances of the most popular industrials sector ETFs with their expense ratios, and consider the cost efficiency of higher management expenses.
  2. Investing

    Great Company Or Growing Industry?

    Look at the big picture when choosing a company - what you see may really be a stage in its industry's growth.
  3. Investing

    The 4 Largest Industrials ETFs (XLI, VIS)

    Learn about the industrials sector performance in 2016, what is driving gains in the sector, and a look at the top four largest industrials ETFs by AUM.
  4. Investing

    Explaining Industry

    The term industry refers to a classification of companies that share similar business activities.
  5. Financial Advisor

    Financial Funds Provide Diversity ... And Risk

    Sector funds can provide maximum exposure to financial industry stocks, but this benefit is a double-edged sword.
  6. Insights

    Industrials Sector: Industries Snapshot (XLI, BA)

    Discover the 12 industries that comprise the industrials sector of the Standard and Poor's 500 Index, and learn which key companies could help your portfolio.
  7. Investing

    Global Industrial Services: Exploring Revenue Trends & Fundamentals

    Analyze geographical industrial service sector data to determine which factors influence revenue exposure by country and drive trends over time.
  8. Financial Advisor

    An Introduction To Sector Mutual Funds

    Investing among several different sectors in the economy is a way to diversify your portfolio.
  9. Investing

    ETF Flows: Industrials ETFs Shedding Assets (FXR, IYJ)

    Discover four exchange-traded funds (ETFs) that invest in stocks of industrial companies and experienced large year-to-date capital outflows, as of March 4, 2016.
  10. Insights

    Is a U.S. Industrial Recession on the Horizon in 2016?

    Find out why the industrial economy may be teetering on an industrial recession and what could prevent it from going over the cliff.
RELATED FAQS
  1. How does the risk of investing in the industrial sector compare to the broader market?

    Discover how the risk of investing in the industrial sector compares to the broader market. The industrial sector is highly ... Read Answer >>
  2. What economic indicators should be monitored when investing in the industrial sector?

    Discover the economic indicators to monitor when investing in the industrial sector. The industrial sector is cyclical and ... Read Answer >>
  3. What mutual funds can be used for investing in the industrial sector?

    Learn how investors can take advantage of the benefits of the industrial sector by purchasing shares of sector-focused mutual ... Read Answer >>
  4. When during the economic cycle should an investor buy into the aerospace sector?

    Learn why the expansionary phase of the economic cycle is the best time to invest in the aerospace sector and how to use ... Read Answer >>
  5. What other sectors are most highly correlated with the aerospace sector?

    Learn about the aerospace industry and two closely related industries that share many of the same characteristics. Discover ... Read Answer >>
  6. How can I invest in the corporate bond market without a lot of money to invest?

    Discover the factors that drive share prices in the aerospace sector. This sector is defensive due to companies' balance ... Read Answer >>
Hot Definitions
  1. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  2. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  3. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  4. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  5. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
  6. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
Trading Center