By Max Sato
(MaceNews) – U.S. manufacturing activity sprang back to life in January, marking the first expansion in 12 months backed by unclear optimism that demand will improve, but overall sentiment remains gloomy, hit by the lingering uncertainty caused by protectionist U.S. trade policy.
The purchasing managers index compiled by the Institute for Supply Management jumped 4.7 percentage points to a 41-month high of 52.6 from 47.9 in December with a sharp turnaround in new orders and production.
But as the ISM noted, January is a restocking month after the holiday season and “some buying appears to be to get ahead of expected price increases due to ongoing tariff issues.”
Comments by firms in the January survey were mostly negative. To list a few, the impact of President Trump’s tariff threats on the European Union “will have a huge negative impact on our profit” and geopolitical tensions are “fueling ‘anti-American” buyer sentiment and sales are being lost (both from machinery makers).
“A new year, with new challenges,” a chemical producer lamented. “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 creates some short-term supply management concerns.”
ISM Manufacturing Business Survey Committee Chair Susan Spence is scratching her head over the sharp rebound in the PMI, which stands at the highest since 53.0 in August 2022. She suspects firms are getting a positive outlook from customers who have been in wait-and-see mode for months because of the Trump tariff storms and may have to place orders as their inventories continue dwindling.
The ISM conducted its annual update on seasonal adjustments dating to January 2023, but it did not change the recent trend and it was not a factor to push the PMI above the breakeven point of 50 in the January 2026 survey. The underlying better/same/worse proportions indicate that the unadjusted PMI was already above 50, according to the ISM.
The five sub-indexes that make up for the PMI (December figures in parentheses):
New orders 57.1 (47.4) +9.7; the highest since 59.7 in February 2022
Production 55.9 (50.7) +5.2; the highest since 58.1 in February 2022
Employment 48.1 (44.8) +3.3; the highest since 49.7 in January 2025
Supplier deliveries 54.4 (50.8) +3.6; the highest since 55.2 in April 2025 (above 50 means slower deliveries)
Inventories 47.6 (45.7) +1.9; the highest since 48.5 in November 2025
Among other sub-indexes:
Customers’ inventories 38.7 (43.3) -4.6; lowest since 35.2 in June 2022
Prices 59.0 (58.5) +0.5; the highest since 61.9 in September 2025
Looking at overall sentiment, the January report showed that for every positive comment, there were 2.3 negative comments while on demand sentiment, there were 2 positive comments for every negative comment, Spece told reporters.
“Demand sentiment has turned around,” she said. “There was some optimism in the semi-annual survey released last month. It looks like they are starting to see that.”
On the downside, manufacturers continue to focus on “accelerating staff reductions due to uncertain near- to mid-term demand,” the ISM said. “The main head-count management strategies remain layoffs and not filling open positions.”
Other remarks by Spence during the briefing:
–Customers of U.S. manufacturers have been patiently waiting for the tariff uncertainty to clear but some will eventually look elsewhere.
–Hopes firms are not being threatened by tariffs; focus remains on the pending Supreme Court ruling on the legitimacy of Trump tariffs.
–Firms are seeking supply sources outside China but it takes a long time to find reliable sources.