U.S. industrial production increased for the third consecutive month in August, according to a Federal Reserve report. Auto and utility sectors were the major contributors to this growth.

Strong growth in auto manufacturing actually led to overall improvement in manufacturing output. Vehicle production hit an annual rate of 11.5 million units, its strongest level since April, the Fed said.

Other benchmarks, such as the Institute of Supply Management’s manufacturing data, also point to a rise in economic activity in manufacturing in August. Although tensions induced by ongoing trade disputes are affecting supply chains and employment resources, rising demand, a strong job market and Trump administration’s economic policies such as tax cuts will likely boost factory-based production in the upcoming months.

Therefore, the manufacturing industry could witness solid growth ahead.

Better-Than-Expected Rise in Industrial Production

Federal Reserve’s report indicated that industrial production in August rose by 0.4% while economists polled by Reuters had expected a 0.3% increase.

The Industrial Production Index rose 4.9% year over year. Capacity utilization for the sector was up 78.1% last month, marking the third consecutive monthly increase. Utilities output and mining production advanced 1.2% and 0.7%, respectively.

ISM Data Points to Growing Manufacturing Sector

The manufacturing sector witnessed an increase in economic activity with the overall economy growing for the 112th consecutive month in August, the Institute of Supply Management reported earlier in September.

Purchasing Managers Index, which provides information on present business conditions, increased 320 basis points from July to reach 61.3% last month. A gauge of other indexes that are vital for feeling the pulse of U.S. economy rose too. The New Orders Index and Production Index registered 65.1% and 63.3% growth, respectively. Employment Index experienced a growth of 58.5%, rising by 200 basis points from July.

Stocks to Buy

The increase in industrial production in the country since May positions manufacturing companies well.

We present the following Zacks Rank #1 (Strong Buy) or 2 (Buy) stocks for your consideration.

DXP Enterprises, Inc. (DXPE - Free Report) is a distributor of products and services in the United States, Canada, Mexico and Dubai that add value and provide cost-saving solutions to industrial customers. DXP Enterprises sports a Zacks Rank #1 and has gained 42.6% year to date. Its earnings for 2018 are expected to grow 62.8%.

Chart Industries, Inc. (GTLS - Free Report) manufactures highly engineered equipment that serve end-market applications in Industry, Energy, Life Sciences and Respiratory Healthcare. The company carries a Zacks Rank #2 and has gained 66.1% year to date. Chart Industries has expected earnings growth of 111.5% for 2018.

Flowserve Corporation (FLS - Free Report) is a leading provider of fluid motion and control products and services. The company bears a Zacks Rank #2 and its shares have gained 30.9% year to date. Its earnings for 2018 are expected to grow 25%.

Luxfer Holdings PLC (LXFR - Free Report) is a materials technology company that designs, manufactures and supplies high-performance materials, components and gas cylinders. Luxfer Holdings carries a Zacks Rank #1 and has expected earnings growth of 39.2% for the current year. The company has gained 33.5% year to date.