• The ISM manufacturing index jumped to 52.6 in January 2026, marking the sector's first expansion in 12 months after 26 straight months of contraction, exceeding forecasts of 48.5.
  • New orders soared to 57.1, their highest level since February 2022, while production hit 55.9, signaling robust demand and output growth.
  • Nine industries expanded, including apparel, metals, transportation equipment, and machinery, though employment continued to contract more slowly at 48.1.

US manufacturing activity surged unexpectedly in January, with the PMI climbing 4.7 points from December's revised 47.9, according to data released this week. The sharp gains in new orders, up 9.7 points, and production drove the expansion, with order backlogs growing for the first time since August 2022. Exports rose to 50.2, inventories contracted to 47.6, and prices increased to 59.0 for the 16th consecutive month, indicating persistent input cost pressures.

Efforts to sustain this recovery face challenges, as supplier delays remain elevated and employment has declined for 28 months, though at a slower pace. "The jump in new orders is the most significant since 2020, reflecting stronger domestic demand," said a supply executive familiar with the matter, who spoke on condition of anonymity. Attempts to reach ISM officials for further comment were unsuccessful by press time.

Without continued demand from low customer inventories and growing backlogs, the sector could struggle to maintain momentum. The expansion contrasts with prior months of contraction, including December's PMI of 47.9, the lowest since October 2024. Regional Fed indexes show an uneven recovery, with the Philadelphia index up sharply while others like Dallas and Richmond lag, suggesting localized variations in manufacturing health.

This surge supports broader US economic expansion, now in its 15th month, with the PMI above 47.5 typically indicating growth. However, long-term recovery will require sustained gains amid persistent price pressures, as three of five PMI subindexes are now expanding, up from two. The data, based on surveys of supply executives, highlights a positive shift but leaves room for caution as the sector navigates ongoing global supply chain issues.

Correction: An earlier version misstated the duration of employment contraction; it has declined for 28 months, not 26.