ISM Report: Manufacturing Activity Returns to Expansion in January

The ISM (Institute for Supply Management) Manufacturing PMI entered expansion territory in January, registering 52.6%. This figure is a 4.7-point increase compared to December’s seasonally adjusted reading and the first time manufacturing activity has expanded since February 2025.

“In January, U.S. manufacturing activity returned to expansion territory, with improvements in all five subindexes that make up the PMI (new orders, production, employment, supplier deliveries and inventories),” says Susan Spence, chair of the ISM’s manufacturing business survey committee. A reading below 50% represents contraction.

The new orders index entered expansion territory last month, growing 9.7 points from 47.4% in December to 57.1% in January. The production index is growing at a faster rate, registering 55.9% in January, 5.2 points higher than December’s 50.7%.

Although the employment index remained in contraction, it grew 3.3 points in January to 48.1%, indicating contraction at a slower rate.

“Three demand indicators (the new orders, backlog of orders and new export orders indexes) are in expansion, and the customers’ inventories index remains in ‘too low’ territory,” says Spence. “Although these are positive signs for the start of the year, they are tempered by commentary citing that January is a reorder month after the holidays, and some buying appears to be to get ahead of expected price increases due to ongoing tariff issues.”

Nine manufacturing industries reported growth in January:

• Printing & related support activities
• Apparel, leather & allied products
• Fabricated metal products
• Primary metals
• Transportation equipment
• Machinery
• Chemical products
• Food, beverage & tobacco products
• Computer & electronic products

“Of the six largest manufacturing industries, five (transportation equipment; machinery; chemical products; food, beverage & tobacco products; and computer & electronic products) expanded in January,” says Spence.

Respondents in the survey continue to report challenging industry conditions due to tariffs and geopolitical tensions, leaving many of them uncertain about the future.

“Business conditions remain uncertain. Customers are cautious. Broad-based inflation continues. The Supreme Court tariff decision looms,” writes a respondent from the computer & electronic products sector.

Another respondent in the transportation equipment sectors writes, “‘Hope’ has been word of the year in the transportation equipment industry. Unfortunately, all the hope in the world has not materialized into order activity in 2025 or the first half of 2026. Across the board, buyers continue to stand on the sidelines. As we enter 2026, every conversation revolves around hope that the second half of 2026 starts the turnaround.”