US Factory Activity Recovery Signal Amid Tariff Uncertainty

After experiencing consecutive contractions for ten months, factory activity in the United States finally showed signs of recovery in January of last year. This growth was marked by a significant surge in new orders, although the manufacturing sector still struggles with various structural hurdles. According to data from Jin10, this increase in factory activity occurred in the context of increasingly strict tariff policies, creating a complex market dynamic for producers.

Manufacturing Index Reaches Highest Level Since 2022

The growth rate of factory activity is clearly reflected in the rise of the ISM Manufacturing PMI to 52.6 this month. This figure represents the first time in twelve months that it has surpassed the 50 threshold—an indicator of economic expansion rather than contraction. Even more impressive, it reached its highest point since August 2022, demonstrating strong momentum in the industrial sector.

Understanding the PMI figure of 52.6 is important to gauge the scale of this recovery. A reading above 50 indicates that the majority of survey respondents reported increased business activity, while the previous ten months consistently remained below 50, reflecting ongoing economic pressures.

New Orders Surge, but Production Costs Continue to Rise

The most encouraging component of the ISM report is the new orders sub-index, which jumped sharply to 57.1. This achievement is the highest since February 2022, signaling strong customer demand for manufactured goods. However, this optimism needs to be calibrated with an understanding of the cost challenges facing the industry.

Factories are experiencing sustained price pressures. The paid prices sub-index increased from 58.5 last month to 59.0, indicating a significant upward trend in commodity costs. This rise is largely driven by the impact of import tariffs, which have made raw materials more expensive, thereby squeezing profit margins for local producers and burdening supply chains.

Growth Contradiction: Factories Grow, Jobs Shrink

Although the data shows factory activity growth in the January survey, the employment landscape tells a different story. The manufacturing sector experienced a reduction of 68,000 jobs during 2025, creating a paradox where output growth is not accompanied by new hiring.

This phenomenon can be explained by several factors. First, manufacturing companies are likely increasing efficiency through automation and process optimization, allowing them to meet rising orders without proportionally adding staff. Second, uncertainty related to President Donald Trump’s tariff policies—despite expectations of revitalizing the manufacturing sector—has yet to produce tangible impacts on job creation.

The supplier delivery sub-index rising to 54.4 provides additional insight. Readings above 50 in this index typically indicate longer delivery times. In a strong economy, this can reflect high demand exceeding supplier capacity. However, delays can also signal supply chain disruptions related to tariff complexities and distribution restructuring.

Inflation Outlook Remains a Concern

Ongoing price pressures in the manufacturing sector suggest that commodity inflation has room to continue rising in the coming period. With the paid prices sub-index at 59.0 and still trending upward, the impact of rising production costs is likely to be passed on to consumer prices in the near future.

This complex situation indicates that although factory activity shows promising recovery, this growth is accompanied by deep structural tensions. Broad tariff policies indeed stimulate demand for domestic manufacturing products, but they also create a challenging cost environment that has not yet fully translated into massive job creation.