U.S. Activity Gauge Turns Positive as Factory Orders Soften — Evening Brief – 02.23.26

After a volatile end to 2025 marked by a government shutdown and patchy economic releases, latest data suggests the U.S. economy is regaining its footing, though not without crosscurrents. January activity indicators point to stabilization near trend growth, with improvements in production and employment offsetting lingering softness in factory demand. 

The Chicago Fed National Activity Index (CFNAI) rose to +0.18 in January, up from -0.21 in December, as economic data continues to normalize following reporting delays tied to the October–November government shutdown. The three-month moving average improved to -0.06 from -0.36, signaling growth closer to trend. 

All four broad categories of indicators improved month over month. Production-related indicators led the rebound, contributing +0.189 compared to -0.03 in December. Employment-related indicators also turned positive at +0.01, versus -0.11 previously. Sales, orders and inventories remained modestly negative at -0.02, while personal consumption and housing moved to a neutral contribution after subtracting -0.04 in December. 

The data suggests economic momentum has steadied, with manufacturing and labor conditions showing incremental improvement. However, separate Census Bureau data painted a more nuanced picture of the industrial sector. Factory orders fell 0.7% month-over-month to $617.5 billion in December, matching expectations and following a 2.7% rise in November. Durable goods orders declined 1.4% to $319.9 billion, driven by a 5.4% drop in transportation equipment. Nondurable goods orders were essentially flat at $297.6 billion. 

Shipments rose 0.5% to $609.2 billion, while unfilled orders climbed 0.9% to $1.53 trillion, marking gains in 17 of the last 18 months. Inventories increased 0.1% to $949.6 billion, and the inventories-to-shipments ratio edged down to 1.56 from 1.57.