ISM: U.S. Manufacturing Activity Rises to Highest Level Since 2022

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Written by Danny Levin, Deputy Editor for IIR News (Sugar Land, Texas)

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Summary

The Institute of Supply Management's (ISM) Purchasing Managers Index, a leading indicator for the level of economic activity in U.S. manufacturing, reached its highest level since 2022 and showed expansion for the first time in 12 months. Main demand indicators such as new orders showed vast improvement.

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The ISM's Latest Purchasing Manager's Index

The ISM's Purchasing Manager's Index (PMI), which tracks 18 manufacturing sectors in the U.S., registered 52.6% in January, marking the highest figure since September 2022 and the first expansion in manufacturing activity in 12 months.

Any reading under 50% indicates contraction in the manufacturing economy, and December's reading of 47.9% was the lowest level of 2025.

"In January, U.S. manufacturing activity returned to expansion territory, with improvements in all five subindexes that make up the PMI (New Orders, Production, Employment, Supplier Deliveries, and Inventories), though the Employment and Inventories indexes still remain in contraction," said Susan Spence, chair of the ISM Manufacturing Business Survey Committee, in the latest summary of findings for the PMI survey.

"Three demand indicators (the New Orders, Backlog of Orders and New Export Orders indexes) are in expansion, and the Customers' Inventories Index remains in 'too low' territory, contracting at a faster rate. A 'too low' status for the Customers' Inventories Index is usually considered positive for future production. 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, and some buying appears to be to get ahead of expected price increases due to ongoing tariff issues."

The New Orders Index (57.1%) for January expanded for the first time since August, jumped 9.7% from December and reached its highest mark since February 2022. January's Production Index (55.9%) is 5.2% higher month-over-month and the highest since February 2022.

Spence noted for every negative survey comment about new orders, two comments indicated optimism about near-term demand--although that could be a result in part due to the aforementioned post-holiday replenishment and desire to avoid tariff-driven price increases.

Regarding output, the Production Index is in expansion for the third month in a row, and while the Employment Index is still in contraction, it saw a 3.3% jump from last month.

Survey Respondents Note Tariffs Continue to Impact Manufacturing Operations

The Prices Index indicated raw materials prices increased for the 16th straight month. This "continues to be driven by increases in steel and aluminum prices that impact the entire value chain, as well as tariffs applied to many imported goods." About 29% of respondents reported higher prices in January, up 2.6% from December.

Those respondents continue to express unease regarding tariffs and the overall economic/geopolitical landscape.

One from Machinery said: "Continuing softness in the market, with December orders below average and buyers reluctant to spend despite beneficial tax policies in the U.S. Geopolitical tensions are fueling 'anti-American' buyer sentiment, and sales are being lost."

Two comments from Computer & Electronic Products include: "movement of custom product out of China continues, but the progress is slow with new qualifications required for transitioned materials and assemblies," while another said "business conditions remain uncertain. Customers are cautious. Broad-based inflation continues. The Supreme Court tariff decision looms."

U.S. Manufacturing Projects Under Construction

Despite any negative sentiment, data from Industrial Info's Global Market Intelligence (GMI) Project Database shows more than $500 billion worth of Industrial Manufacturing Industry projects are under construction across the U.S.

Nearly 40% of the overall spend is attributed to data centers.

This includes construction belonging to the Stargate Project, a joint venture company including heavy hitters such as OpenAI and Oracle, aimed at building a network of artificial intelligence (AI) data centers across the country.

Underway are six data center buildings at one of the two planned campuses in Abilene, Texas, and Building 1 at a campus in New Mexico ("Project Jupiter"). In addition, Oracle is at work renovating the former General Motors manufacturing complex in Lordstown, Ohio, in order to begin producing AI components and equipment for Stargate. All of the projects are expected to wrap up by the end of the year.

Subscribers to the GMI database can view reports for the Stargate projects under construction, and click here for a full list of U.S. Industrial Manufacturing Industry projects under construction.

Key Takeaways

• The ISM's Manufacturing PMI notes economic activity in U.S. manufacturing reached its highest level since 2022 and expanded for the first time in 12 months.
• All five indicators, including new orders and production, improved month-over-month.
• Tariffs and economic/geopolitical uncertainty remain a concern for manufacturers.
• U.S. manufacturing construction remains robust, according to IIR data, especially in the data center sector.

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About IIR News Intelligence
IIR News Intelligence is a trusted source of news for the industrial process and energy markets, powered by Industrial Info Resources' Global Market Intelligence (GMI).

About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 250,000 current and future projects worth $30.2 Trillion (USD).