“We are so back.”
Factory activity in America picked up dramatically at the beginning of 2026, according to the first of this week’s top-tier US macro data.
52.6 may not sound like the “wild” rebound I promised in the title, but relative to where we’ve been on the ISM manufacturing headline, it felt anomalously (suspiciously) good.
Indeed, this was the best print since the summer of 2022. Consensus understandably expected another contraction-territory read. After all, US manufacturing is (or at least was) mired in a forever recession.
The figure above gives you some context for the month-to-month gain. At nearly 5ppt, it was the most pronounced since the rebound from the original COVID plunge.
It’s hard to overstate how atypical this feels. Macro watchers are by now numb to sub-50 ISM manufacturing prints, having seen — checks notes — 35 of them in 38 months.
In December, panelists were still describing the situation as “cold and bleak.” Just a month later, it’s warmed up considerably by appearances.
The chart shows you how rare headline prints above 50 really are post-2021.
The subindexes all improved. At 55.9, the production gauge was the highest in years and new orders rose a truly remarkable 9.7ppt from December, the largest increase since 2020.
The prices index rose only marginally: Half a point, to 59. One might’ve expected more in the way of input cost pressure pervasiveness given the upturn in activity. That wasn’t the case, and that’s a good thing.
Although still below 50, the employment gauge rose more than 3ppt, to 48.1.
As the figure shows, that was the best readout in a year, although there’s a long way to go.
Taken at face value, this was an unequivocally upbeat read on the otherwise moribund US manufacturing sector. But the report included a caveat which doubled as a word of caution.
“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,” the accompanying color read. “Some buying appears to be to get ahead of expected price increases due to ongoing tariff issues.”
The participant comments are very negative. Respondents say they can’t plan or forecast, are cutting costs as profits weaken, trying to move production but don’t know where tariffs will hit next. Perhaps we’re in a period where you draw down your inventories and reorder just in time as tariff windows open and close. Perhaps businesses are betting on IEEPA tariffs being struck down and either receiving their ocean containers after that or getting tariffs refunded. Or maybe there is a manufacturing renaissance blooming and the ISM somehow quoted only the companies that haven’t gotten the memo.
A look at manufacturing project starts posts a very optimistic picture of the future given the surge last year. Any thoughts on the contradiction here?