Regional manufacturing surveys surged into expansion in January, signaling economic momentum, stronger orders, easing prices, and growing optimism ahead of ISM’s national data.
More evidence pointing to the economy's strength emerged on Friday as a measure of regional business activity jumped solidly in January, moving into expansion territory in the process.
Labor Market Drives Improvement: The Chicago Business Barometer jumped by 11.3 points to 54 in January, according to a report produced by ISM-Chicago, along with MNI, on Friday. A reading above 50 shows expanding activity. Economists had expected the index to come in at 43.5. The headline index moved into expansion territory after 25 consecutive months below the “50” mark.
Source: ISM-Chicago/MNI
The strong gain was achieved on the back of increases in employment, new orders, order backlogs, and production. Meanwhile, supplier deliveries served as a drag.
The results are based on a survey carried out between Jan. 2 and 14.
Here’s how the various components fared:
- Employment jumped 17.5 points to the highest level since December 2024, but stayed in contraction territory.
- New orders rose 15.8 points to the highest levels since March 2022.
- Order backlogs increased by 11.5, moving into expansion territory for the first time since December 2022
- Production gained 9.1 points to the highest since December 2023
- Inventories surged up 14.3 points, moving into expansion territory for the first time since April.
- Prices paid fell 9 points following four consecutive months of increases, falling to the lowest level since January.
- Supplier deliveries declined 2.1 points and yet remained in the expansion zone for the 12th consecutive month.
Manufacturing Out of Woods? The New York Federal Reserve’s Empire State Manufacturing survey for January also showed the headline index lifting from recessionary territory. The business conditions index climbed to 7.7 in January from the previous month’s -3.7. New orders and shipments improved strongly, while employment declined.
The Philadelphia Fed’s diffusion index of business activity jumped 21.4 points to 12.6, marking the highest reading since September.
Traders will now likely look ahead to the Institute for Supply Management’s manufacturing survey results due on Feb. 2 for confirmation of the positive manufacturing signals from the regional surveys. Manufacturing’s share of the U.S. GDP was at 9.5% in the third quarter of 2025.
According to Atlanta GDPNow latest modeling the U.S. economy is estimated to have expanded by 4.2% in the fourth quarter.
Read Next: December PPI Surges On Services Inflation: Could Higher Prices Disrupt Fed’s Policy Plans?