American manufacturing roared back to life in January, posting its strongest performance in nearly four years and ending more than two years of persistent contraction.
The Institute for Supply Management’s manufacturing index surged to 52.6 in January from 47.9 in December, marking the sector’s first expansion in a year and capping what had been 26 consecutive months of decline. The 4.7-point jump far exceeded economists’ expectations and represented the most robust reading since early 2022.
The turnaround was driven by a surge in demand. New orders jumped 9.7 points to 57.1, the highest level since February 2022, while production climbed to 55.9, also the strongest in nearly four years. Order backlogs expanded for the first time since August 2022, rising to 51.6.
“In January, U.S. manufacturing activity returned to expansion territory,” said Susan Spence, chair of the ISM Manufacturing Business Survey Committee. The breadth of the recovery was striking: only 20 percent of manufacturing GDP remained in contraction in January, down sharply from 85 percent in December.
A separate survey from S&P Global told a similar story. Its manufacturing PMI rose to 52.4 in January, with production growth hitting its joint-sharpest pace since May 2022. New orders returned to expansion after months of decline.
The strength came despite—or perhaps because of—looming tariff concerns. Customer inventories contracted at the fastest pace since mid-2022, hitting their lowest level since June 2022, according to ISM. The lean stockpiles suggest businesses had drawn down inventories heavily and now needed to reorder. But some of the buying surge appeared to reflect companies stocking up ahead of expected cost increases from tariffs.
“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,” Spence said.
Nine manufacturing industries reported growth in January, including transportation equipment, machinery, chemical products, and fabricated metal products.
The recovery remained incomplete in some areas. Employment, while improving, stayed in contraction at 48.1, though that marked a one-year high. Export orders barely crept into expansion territory at 50.2, after seven months of decline, with both surveys reporting that tariffs continued to weigh on international sales.
Price pressures intensified. The ISM prices-paid index rose to 59, a four-month high, while the S&P Global survey showed input costs accelerating and manufacturers passing along the highest price increases since August.
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