U.S. ISM Manufacturing Index (January 2026)

ISM Manufacturing Index in Expansion for the First Time in Almost a Year

• The ISM Manufacturing Index improved solidly in January, rising by 4.7 points – well above expectations – to 52.6 from 47.9 in December. This marked the first time that the index rose above its 50-point threshold in almost a year, pointing to growth. 
• The number of manufacturing industries reporting growth improved to nine out of eighteen, up from only two in the month prior. Eight industries reported a contraction. Looking at the manufacturing economy, only 20 percent of the sector’s gross domestic product (GDP) contracted in January, compared to a much worse outturn (85 percent) in December. 
• Demand conditions trended higher, with gains in new orders (up 9.7 points to 57.1), new export orders (up 3.4 to 50.2), and the backlog of orders (up 5.8 to 51.6), shifting each of these indicators from contractionary to expansionary territory. 
• The production index improved further, rising to 55.9 in January from 50.7 in December. The employment index also showed an improvement, but remained in contractionary territory (up 3.3 points to 48.1). 
• Supplier deliveries slowed a touch (up 3.6 points to 54.4), while the prices paid subindex ticked higher (up 0.5 points to 59).

Key Implications

• This was a solid report. Most ISM manufacturing indicators showed an improvement in January, and the headline index moved above the 50-point threshold, which indicates expansion for the first time in almost a year. The improvement was also broad-based, with most industries and the bulk of the sector's GDP reporting growth in January. The one fly in the ointment was the employment index, which remained in contractionary territory despite gaining some ground – indicative of an industry that continues to shed jobs. 
• Despite the positive tone in today's report, one month does not make a trend. The recent ramp up in trade pressure, especially with partners where agreements are already in place (i.e., the UK, EU), suggests that trade uncertainty may persist longer than previously anticipated. This environment will continue to pose near term challenges for the manufacturing sector. These concerns were echoed in survey responses, with one such comment stating "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".

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