Manufacturing PMI Rises to 52.6% in January Even as Wood & Furniture Production Contracts

By Staff Reporter

TEMPE, Ariz. — Economic activity in the U.S. manufacturing sector showed signs of broad expansion in January 2026, breaking a prolonged period of contraction, according to the latest Institute for Supply Management (ISM) Manufacturing PMI Report. The report revealed that the Purchasing Managers’ Index (PMI) climbed to 52.6 percent, up from 47.9 percent in December, marking the first expansion in overall manufacturing activity in nearly a year and a strong signal that production and new orders have begun to recover.

A PMI reading above 50 percent generally indicates growth rather than contraction, and January’s reading represents a 4.7-percentage-point increase compared with the previous month — reversing a trend of 26 straight months of contraction in many manufacturing segments.

New Orders and Production Showing Strength

The ISM report showed encouraging momentum in several key measures of manufacturing performance:

• New Orders Index expanded for the first time since August, registering 57.1 percent, up sharply from 47.4 percent in December and reaching levels not seen since early 2022.
• Production Index climbed to 55.9 percent, also its highest reading since February 2022.
• Prices Index — which reflects suppliers’ selling prices — remained elevated at 59 percent, signaling continued inflationary pressures on input costs for manufacturers.

Collectively, these figures suggest that demand and output are rejuvenating across many sectors after a prolonged downturn, with businesses restocking and responding to improved order flows.

Broad Sector Performance: Winners and Laggards

Despite the overall expansion in manufacturing, not all sectors posted gains in January. The report identified nine industries reporting growth, including Printing & Related Support Activities, Apparel & Leather Products, Primary Metals, Fabricated Metal Products, Transportation Equipment, Machinery, Chemical Products, Food, Beverage & Tobacco Products, and Computer & Electronic Products.

However, sectors such as Wood Products and Furniture & Related Products continue to experience contraction. Wood and furniture manufacturing reported declines in production, inventories, new orders, and employment — indicating persistent challenges within those specific niches despite broader industry strength.

This divergence highlights a mixed picture within manufacturing: while general activity is regaining momentum, traditional wood and furniture producers are still struggling to generate sufficient demand and output growth compared with other product segments.

Backlog and Employment Trends

The report also showed improvement in the Backlog of Orders Index, which moved to 51.6 percent, signaling some buildup in pending work and a step toward fuller production pipelines. Employment — as measured by the Employment Index — registered 48.1 percent, a rise from December’s 44.8 percent but still below the 50 percent threshold that denotes growth in hiring.

This suggests that while production capacity is responding to rising orders, firms remain cautious in expanding their workforce, possibly due to remaining uncertainty around demand in certain segments.

Industry Perspectives on Challenges Ahead

Commenting on the PMI data, some manufacturing respondents voiced concerns about tariff threats and their potential impact on profitability and supply chains, especially in capital-intensive sectors. One machinery manufacturer noted that looming tariff increases in the European Union could significantly affect current quoted orders and reduce profitability.

Such commentary underscores ongoing structural challenges that could temper the broader recovery within certain manufacturing sub-sectors, including wood and furniture production, even as headline PMI figures improve.

Outlook for Manufacturing in 2026

The January PMI rebound reflects a cautiously optimistic start to 2026 for the U.S. and global manufacturing sectors. While core industrial segments — notably those tied to metals, chemicals, and transportation equipment — are showing clear signs of renewed demand, wood and furniture manufacturers remain under pressure due to sustained contraction in key performance metrics and inventory challenges.

Analysts suggest that continued expansion in new orders and production could translate into broader growth across sectors later in the year, but improvements in furniture and wood products may lag until consumer and commercial demand strengthens further. Structural factors like tariff uncertainty and supply costs are likely to shape the trajectory for these industries in the months ahead.

Conclusion

January’s ISM Manufacturing PMI report signals a significant turnaround in broad manufacturing activity for the first time in nearly a year, with higher production, new orders, and price pressures that point toward expanding economic activity. However, the persistent contraction in wood and furniture product segments highlights the uneven nature of this recovery and the continuing challenges facing furniture manufacturers as they navigate rising costs, shifting demand, and global trade uncertainties.