U.S. Manufacturing Returns to Expansion as ISM PMI Jumps Above 50 — Evening Brief – 02.02.26

U.S. manufacturing activity expanded in January for the first time in a year, as the Institute for Supply Management’s Manufacturing PMI surged to 52.6—well above the 48.5 consensus and December’s 47.9 reading. A level above 50 signals expansion, snapping a 26-month stretch of contraction.

“In January, U.S. manufacturing activity returned to expansion territory, with improvements in all five subindexes that make up the PMI,” said Susan Spence, chair of the ISM Manufacturing Business Survey Committee. She noted, however, that employment and inventories remain in contraction territory.

The rebound was driven by a sharp pickup in new orders, which jumped to 57.1 from 47.4 in December, alongside stronger production and faster supplier deliveries. The prices-paid index remained elevated at 59.0, underscoring persistent cost pressures even as demand improves. Employment rose to 48.1 from 44.8 but has yet to cross into expansion.

A similar message emerged from S&P Global, whose final January Manufacturing PMI came in at 52.4, up from 51.8 in December. S&P Global said growth was partly fueled by inventory building, as production outpaced new orders early in the year.

“Production growth consequently significantly outpaced that of new orders at the start of the year, resulting in a further accumulation of unsold warehouse inventory,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.

Looking ahead, confidence remains resilient. Williamson noted that expectations are holding just below long-term trend as firms anticipate improving demand, helped by lower interest rates, reduced import competition from tariffs, and increased government support—though political uncertainty continues to weigh on sentiment.