US Manufacturing Activity Expands by the Most Since 2022

The US manufacturing sector expanded at its strongest pace since May 2022 in January 2026, according to the S&P Global US Manufacturing PMI. The index rose to 52.4, above the preliminary estimate of 51.9 and higher than December's five-month low of 51.8 according to the PMI report. This marks a firming in the pace of expansion and aligns with the long-run average of the indicator.

Output from US manufacturers saw a sharp increase in January, the strongest rise since last August. This output growth was driven by strong demand in the domestic market, though export orders continued to decline according to the PMI data.

New orders rebounded modestly, though overall demand remains constrained. Export orders have declined for seven consecutive months, impacted by trade uncertainties and tariffs as the PMI report shows. This trend highlights a broader challenge for manufacturers seeking to expand globally.

Manufacturers increased selling prices at the fastest pace since August 2025, as input cost pressures strengthened according to the PMI data. This signals a renewed focus on passing on rising costs to consumers, which could contribute to inflationary pressures in the near term.

Hiring in the sector remained positive, but job growth slowed to a three-month low according to the PMI report. This suggests that while the sector is still expanding, the pace of labor demand has moderated.

Business confidence remained unchanged, with ongoing concerns about geopolitical risks and rising costs continuing to weigh on the outlook according to the PMI data. Despite stronger output and pricing, these factors suggest that long-term optimism among manufacturers has not improved.

Why the Move Happened

The rebound in manufacturing activity is attributed to strong domestic demand, particularly in the output of goods according to the PMI report. While export markets remain weak, the domestic economy appears to be absorbing more of the sector's output. This may reflect broader economic resilience in the US consumer sector, which has continued to support demand despite macroeconomic headwinds.

The increase in input cost pressures and the resulting pass-through to prices indicate ongoing inflationary risks in the manufacturing sector according to the PMI data. These pressures are likely to persist as global supply chains continue to face disruptions and energy prices remain elevated.

What Analysts Are Watching

Analysts are monitoring how the continued expansion of manufacturing activity will impact broader inflation trends according to the PMI report. With manufacturers raising prices at the fastest pace since late 2022, there are concerns that this could contribute to a resurgence in core inflation, which has remained stubbornly high in recent months.

The slowdown in hiring is also a point of focus for analysts and policymakers according to the PMI data. If the pace of job creation in manufacturing continues to decline, it could signal a shift in the labor market, potentially reducing wage growth and moderating inflationary pressures.

The continued weakness in export orders raises questions about the long-term sustainability of the sector's expansion according to the PMI report. Analysts are watching how policymakers and businesses respond to trade tensions, as these factors could shape the outlook for global demand in the coming months.

Overall, the latest data suggests that US manufacturing is on a stronger growth trajectory, but challenges remain in terms of global demand and inflationary pressures according to the PMI data. The sector's ability to navigate these issues will be key to its long-term performance.