EconoFACTS

February 02, 2026 | 11:03

U.S. ISM Manufacturing Index Jumps in January

Economist

Chief U.S. Economist and Managing Director
Economics

Scott Anderson is BMO’s Chief U.S. Economist and Managing Director. He analyzes and forecasts U.S. national and ... (Read more)

Scott Anderson , Ph.D.

Chief U.S. Economist and Managing Director
Economics

Scott Anderson is BMO’s Chief U.S. Economist and Managing Director. He analyzes and forecasts U.S. national and ... (Read more)

The ISM Manufacturing Index jumped 4.7 points in January to 52.6, a far stronger increase than forecast and the best reading on this measure in more than three years. The index is now solidly in expansion territory after ten consecutive months in contraction territory and sinking to its lowest level of the year in December. Post holiday restocking helped push the new orders index up 9.7 points. Producers cited preemptive buying ahead of expected price increases. Concern around tariffs and input costs remains high. Encouragingly, the production index gained 5.2 points to 55.9, the highest level since February 2022 and the third consecutive month in expansion territory. Backlog of orders also jumped 5.8 points, suggesting that customer demand exceeded current production capacity. The employment index increased 3.3 points but remained in contraction territory at 48.1. Two-thirds of respondents reported managing headcount rather than hiring. Prices paid nudged 0.5 points higher and remains elevated at 59.0. Customer inventories are low, contracting by 4.6 points to 38.7. This should keep manufacturing production expanding briskly in the first quarter

Bottom-line: U.S. manufacturing activity came back to life in January. Post-holiday inventory rebuilding and tariff front-running were important drivers of robust goods demand last month. This report implies a strong rebound in industrial production growth in Q1, but also reminds that tariffs and elevated inflation remain a sizable risk for the sector in 2026. The Fed will welcome the resilience coming from the cyclical manufacturing sector, but will view the rapid pace of goods demand and elevated inflation coming from the manufacturing sector by actively guarding the inflation mandate. The ISM Manufacturing data support the view that the FOMC will remain on the sideline at the March Meeting.

Table 1 - United States — ISM Manufacturing PMI

(percent reporting)

Source: BMO Economics, Haver Analytics