U.S. Manufacturing Returns to Growth in January 2026

Source: Dukascopy Bank SA
In January 2026, the U.S. manufacturing sector returned to growth, ending a year-long period of contraction. The Manufacturing PMI® rose to 52.6 percent, up 4.7 points from December, signaling expansion in both manufacturing activity and the broader economy. This turnaround was fueled primarily by rising demand and increased production. New orders surged to 57.1 percent, the highest level since February 2022, marking a clear shift from contraction to strong expansion. Production continued to grow for the third month in a row, reaching 55.9 percent. At the same time, customer inventories fell to 38.7 percent, a level considered "too low," which helped drive additional production and contributed to the rebound in new orders and order backlogs.

Despite overall sector growth, employment remains a weak spot. The Employment Index stayed in contraction at 48.1 percent for the 28th consecutive month, although it showed some improvement from December. Many manufacturers continue to prioritize managing headcount and limiting hiring rather than filling open positions. Supply chains are also tightening as activity increases, with the Supplier Deliveries Index rising to 54.4 percent, reflecting slower delivery speeds typical during periods of higher demand.



Cost pressures and policy uncertainty remain significant challenges. The Prices Index climbed to 59 percent, marking the 16th consecutive month of rising raw materials costs, largely due to steel, aluminum, and tariff-related expenses. Executives also reported ongoing concerns about trade policy uncertainty, particularly regarding tariffs on China, Mexico, and the EU. Some companies are increasing purchases now to get ahead of anticipated tariff-driven price hikes, which adds to supply chain volatility and complicates long-term planning.

Among the six largest manufacturing industries, five—Transportation Equipment, Machinery, Chemical Products, Food, Beverage & Tobacco Products, and Computer & Electronic Products—expanded in January. Overall, nine manufacturing industries reported growth while eight contracted, showing a broad but uneven recovery across the sector. January's data highlight a manufacturing sector regaining momentum, supported by strong demand and production, though challenges in labor, supply chains, and costs remain important factors to watch.
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