- KPI – February 2026: The Brief
- KPI – February 2026: State of Business – Automotive Industry
- KPI – February 2026: State of the Economy
- KPI – February 2026: Consumer Trends
- KPI – February 2026: Recent Vehicle Recalls
Economic activity in the manufacturing sector expanded in January for the first time in 12 months, preceded by 26 straight months of contraction, according to the nation’s supply executives in the latest ISM Manufacturing PMI Report. The Manufacturing PMI registered 52.6% in January, a 4.7 percentage point increase compared to the seasonally adjusted reading of 47.9% in December.
“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), though the Employment and Inventories indexes still remain in contraction,” says Susan Spence, MBA, chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee.
Data shows 20% of the sector’s gross domestic product (GDP) contracted in January, compared to 85% in December. Moreover, the percentage of manufacturing GDP in strong contraction—defined as a composite PMI of 45% or lower—decreased to 12%, compared to 43% in December.
“The share of sector GDP with a PMI at or below 45% is a good metric to gauge overall manufacturing weakness. 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.
Important Takeaways, Courtesy of the Manufacturing ISM Report On Business:
- 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, contracting at a faster rate. A “too low” status for the Customers’ Inventories Index is usually considered positive for future production. 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 ahead of expected price increases due to ongoing tariff issues.
- Regarding output, the Production Index is in expansion for the third month in a row, and the Employment Index, though still in contraction, saw a 3.3 percentage point improvement. However, 66% of panelists still indicate that managing headcounts is the norm at their companies as opposed to hiring.
- Inputs—defined as supplier deliveries, inventories, prices and imports—were mixed, with the Supplier Deliveries Index indicating slower deliveries, the Inventories Index remaining in contraction and the Prices Index continuing to rise.
What Respondents Are Saying:
Note: These quotes were provided before the U.S. Supreme Court’s 6-3 ruling to strike down the Trump Administration’s tariffs issued under the International Emergency Economic Powers Act of 1977 (IEEPA).
- “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. It’s hard to set strategy on hope, but thanks to the uncertainty brought about by this administration, here we are.” [Transportation Equipment]
- “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]
- “Continuing softness in the market, with December orders below average and buyers reluctant to spend despite beneficial tax policies in the U.S. Geopolitical tensions are fueling ‘anti-American’ buyer sentiment, and sales are being lost.” [Machinery]
- “Another round of emotionally charged tariffs seems imminent, changing the landscape once more. Movement of custom product out of China continues, but the progress is slow with new qualifications required for transitioned materials and assemblies.” [Computer & Electronic Products]
- “Business conditions remain uncertain. Customers are cautious. Broad-based inflation continues. The Supreme Court tariff decision looms.” [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]
- “A new year, with new challenges. We are moving manufacturing from China to Mexico, which will now impose tariffs on parts made in China. This push for more of a Mexican supply chain and creates some short-term supply management concerns.” [Chemical 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 Metal Products]
- “Business conditions remain soft as we continue to miss sales, orders and profits as result of increased costs from tariffs, continued fallout from the government shutdown and increased global uncertainty.” [Miscellaneous Manufacturing]
- “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. Tariff impacts on our financial performance last year cannot be overstated, as we had a much smaller EBITDA (earnings before interest, taxes, depreciation and amortization) than previous years. While other inflationary pressures continue to hit the business, tariffs and product costs played a large role. This year, we will continue our multi-country sourcing approach to manufacture and import product from more tariff-friendly countries outside of China. But as we know, nothing is guaranteed with the current administration. We have trimmed costs everywhere inside the business, including on labor and conferences, and reduced our revenue forecast to a much more achievable mark. We’re prepared to battle throughout the year for higher profitability.” [Apparel, Leather & Allied Products]