U.S. manufacturing activity unexpectedly expanded in January at the fastest pace since 2022, energized by solid growth in new orders and production.
The Institute for Supply Management’s manufacturing index rose to 52.6 from 47.9, according to data released Feb. 2. Readings greater than 50 indicate expansion, and the latest figure topped all projections in a Bloomberg survey of economists.
Following nearly a year of contraction, the demand-related spike in factory activity is welcome news. Sustained growth would help provide reassurance that manufacturing is on the mend after languishing the past three years.
The ISM report showed a nearly 10-point increase in a gauge of new orders and a firm advance in the production index — both of which indicated the fastest growth in nearly four years. Order backlogs expanded for the first time since 2022, while export orders also increased.
Treasury yields and the dollar rose, while the S&P 500 remained higher after the report.
The strength in demand reflected in part a decline in a measure of customer inventories, which contracted by the most since mid-2022. Lean customer stockpiles have the potential of providing more of a tailwind for factory orders and production in the coming months.
“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,” Susan Spence, chair of the ISM Manufacturing Business Survey Committee, said in a statement.
Nine industries reported growth last month, including apparel, fabricated metal products, transportation equipment and machinery. Eight contracted.
The ISM gauge of factory employment climbed 3.3 points to a one-year high of 48.1, indicating headcount shrank but at a slower pace.
A measure of supplier delivery performance climbed to the highest level since May and indicated manufacturers were facing longer lead times for inputs used in production.
At the same time, the report also indicated that manufacturers are finding little relief from elevated input costs. The ISM prices-paid index climbed in January to a four-month high of 59.
Select ISM Industry Comments
“Although our volume is low at the moment, the impact on the latest tariff threats on the European Union will have a huge negative impact on our profit for current quoted orders. We will not be able to recover the increase tariffs in our current quotations.” — Machinery
“Business conditions remain uncertain. Customers are cautious. Broad-based inflation continues.” — Computer & Electronic Products
“Growing construction markets, data centers and energy projects, are straining the contract labor availability. The trade tariff uncertainty is creating volatility in the supply chain.” — Food, Beverage & Tobacco Products
“Confused and uninformed tariff policies continue to plague small companies, making long-term planning pointless. Companies are not making capital commitments beyond 30 days.” — Fabricated Metals
“Business trends moving into 2026 feature many of the headwinds from the third and fourth quarters of 2025. While the ‘plane’ has steadied, there continues to be uncertainty and added costs through our global operations.” — Apparel
Producers continued to draw down their inventories, though at a slower pace than the month prior.
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ARTICLE BY: Bloomberg News | Shared by: Staffing Industry Analysts | Published: February 2, 2026
