Confidence in a manufacturing rebound is on the rise, as the industry saw demand and production grow in January, according to the Institute for Supply Management’s Purchasing Managers’ Index.
After more than two years of economic decline in the industry, the institute's PMI registered 50.9% last month. A reading over 50% signifies an industry in economic growth.
The reading was up from 49.3% in December, driven by rising consumer demand and corresponding production. ISM's new orders index rose three percentage points to 55.1%, while the production index rose to 52.5%, up from 49.9% in December.
Supplier delivery speeds slowed last month in response to the demand, a positive growth sign that the supply chain is tightening amid a growing order list.
"Factory output improved compared to December, indicating that panelists’ companies are proceeding with growth plans. Employment was stable as final head-count adjustments were made, in many cases among the white-collar workforces," Timothy Fiore, chair of the ISM’s manufacturing business survey committee, said in a statement. "Inputs generally continued to accommodate future demand growth, with inventories declining."
ISM respondents noted better than expected demand, with some even readying for possible material shortages as the supply chain readjusts to a busier environment.
Eight manufacturing industries reported growth in January, according to ISM, including textile mills; primary metals; petroleum and coal products; chemical products; machinery; transportation equipment; plastics and rubber products; and electrical equipment, appliances and components.
S&P Global's PMI registered even more positively at 51.2, up from 49.4 in December. Sentiment rose among manufacturers as they become increasingly bullish about the industry's growth under President Donald Trump.
"Manufacturers report that political uncertainty has cleared and the pro-business approach from the new administration has brightened their prospects," Chris Williamson, chief business economist at S&P Global Market Intelligence, said in a statement. "Production has already improved after falling throughout much of the last half of 2024, amid rising domestic sales. Factories have also stepped up their hiring to meet planned growth of production capacity."
The S&P report highlighted that the pace of job creation rose to its highest level since June 2024.
Multiple ISM survey respondents said they are readying for the impact of new tariffs under the Trump administration. The president instated 25% tariffs on Canada and Mexico over the weekend, but paused both sets of duties for one month on Monday as the countries collaborate on border security measures. Trump’s 10% tariffs on China remain in play, which has prompted retaliatory tariffs from the country, set to take effect Feb. 10.
Manufacturers have been readying for months for the tariffs by front-loading orders, preparing to reroute supply shipments or diversifying their supply base in a bid to avoid the duties.
Even with those preparations however, the tariffs could raise prices for manufacturers. Imports represent 13% of U.S. manufacturing revenue, which could have been hurt by Canada's retaliatory tariffs. The country's two-phased tariff retaliation was expected to hit a variety of goods and supplies, including corrugated and paperboard packaging, which could impact packaging manufacturers, as well as dozens of meat and food products.
