US Manufacturing Activity Transitions to Growth After 26 Months of Contraction

The monthly ISM Report on Business reports that economic activity in the manufacturing sector expanded in January 2025 after 26 consecutive months of contraction. The ISM Manufacturing PMI registered 50.9 percent in January, 1.7 percentage points higher than the seasonally adjusted 49.2 percent recorded in December. Increased demand reflected in the combination of expanding new orders and new export orders indices, coupled with a slight drop in order backlogs and continued low levels of customer inventories, were primary contributors to the increase. The Production, Price, and Employment indices also rose in January.

The New Orders Index of 55.1 percent was in expansion territory for the third month after seven months of contraction, registering 3 percentage points higher than the seasonally adjusted 52.1 percent December figure. The New Export Orders Index of 52.4 percent was 2.4 percentage points higher than the 50 percent registered in December. The Backlog of Orders Index registered 44.9 percent, down 1 percentage point compared with the 45.9 percent recorded in December. The Inventories Index registered 45.9 percent, down 2.5 percentage points compared with December’s seasonally adjusted reading of 48.4 percent.

The Production Index of 52.5 percent was 2.6 percentage points higher than December’s seasonally adjusted figure of 49.9 percent, reflecting a return to expansion after eight months of contraction. The Prices Index of 54.9 percent reflected continued increases, up 2.4 percentage points compared with the December reading of 52.5 percent. The Employment Index registered 50.3 percent, up 4.9 percentage points from December’s seasonally adjusted figure of 45.4 percent. 

Of the six largest manufacturing sectors, three (Machinery; Transportation Equipment; and Chemical Products) reported increased production. The eight manufacturing industries overall that reported growth in January, listed in order, included Textile Mills; Primary Metals; Petroleum & Coal Products; Chemical Products; Machinery; Transportation Equipment; Plastics & Rubber Products; and Electrical Equipment, Appliances & Components. The eight industries that reported contraction in January included Nonmetallic Mineral Products; Miscellaneous Manufacturing; Wood Products; Fabricated Metal Products; Furniture & Related Products; Computer & Electronic Products; Paper Products; and Food, Beverage, & Tobacco Products.

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