Economic Data and Growth

Washington, D.C. – As the review of the United States–Mexico–Canada Agreement gets underway, a majority of manufacturers report they utilize either Canada or Mexico for critical parts of their supply chains—at a time when trade uncertainty remains manufacturers’ top business concern, according to the National Association of Manufacturers Q1 2026 Manufacturers’ Outlook Survey. The survey also shows manufacturers’ optimism is rising, with 75.3% reporting a positive outlook for their company, up 5.4 percentage points from the previous quarter.

Among the manufacturers that utilize Canada or Mexico for critical parts of their supply chain, exactly half rely on both countries, according to the latest findings. The majority of U.S. imports from Mexico and Canada are industrial inputs such as machinery, equipment and raw materials while Canada and Mexico also purchase one-third of manufactured good exports—more than the next nine U.S. trading partners combined.

“Manufacturers are ready for liftoff, but the skies need to clear,” said NAM President and CEO Jay Timmons. “This quarter shows a mixed bag of results with real momentum from tax reform, regulatory rebalancing and energy policy. At the same time, the results underscore how essential durable supply chains are to manufacturing success—and how critical Canada and Mexico are to that system, which is why we need to preserve and strengthen the USMCA.”

“For the first time since 2023, manufacturers’ outlook topped the historical average of 74.3%, and manufacturers expect most indices to improve meaningfully over the next 12 months. Sales and production are projected to rise 3.8% and 3.5%, respectively, up from the previous quarter’s forecast of 2.8% and 2.4% growth,” said NAM Chief Economist Victoria Bloom. “However, challenges persist. For example, raw material and other input costs are not anticipated to slow, rising at the same pace as projected in Q4 (4.1%) and ranking as the third-highest business concern at 57.5%.”

Key findings:

• 70.6% of manufacturers cited trade uncertainties as a top business challenge for the fifth consecutive quarter.
• 54.6% secure critical inputs from either Canada or Mexico—82.2% of those manufacturers say they source raw materials or other inputs from either country.
• Of those that utilize Canada or Mexico, 62.7% benefit from a strong customer base across the border.
• For the second consecutive quarter, rising health care/insurance costs (69.8%) remained the second most-cited business challenge for manufacturers.

The NAM releases these results to the public each quarter. Further information on the survey is available here.

-NAM-

The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs nearly 13 million men and women, contributes $2.95 trillion to the U.S. economy annually and accounts for 53% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org.

U.S. import prices increased 0.2% in January, after a similar rise in December, with higher nonfuel prices more than offsetting lower prices for fuel in January. Over the past year, import prices declined 0.1%. Meanwhile, U.S. export prices rose 0.6% in January, with both higher nonagricultural and agricultural export prices driving the increase. Over the past year, export prices advanced 2.6%.

In January, U.S. import prices for manufacturing rose 0.8% over the year, with most of the industry experiencing price declines. Primary metal manufacturing experienced the most significant over-the-year U.S. import price increase in January, surging 26.1%. On the other hand, the greatest yearly decline in U.S. import prices occurred in beverage and tobacco product manufacturing, which fell 14.1% from January 2025. Meanwhile, U.S. export prices for manufacturing in January advanced 4.0% over the year, with primary metal manufacturing export prices exhibiting the largest rise (43.9%).

Fuel import prices fell 2.2% over the month in January, after declining 1.1% in December. Lower prices for petroleum drove the decrease, moving down 2.7%. Furthermore, prices for fuel imports plummeted 13.4% from January 2025. Meanwhile, natural gas prices jumped 36.4% over the year.

Nonfuel import prices increased 0.5% in January, after moving up 0.2% in December. Higher prices for nonfuel industrial supplies and materials, capital goods, automotive vehicles, consumer goods and foods, feeds and beverages drove the increase. The price index for nonfuel imports grew 1.2% over the past year and has not declined on a year-over-year basis since February 2024.

After no movement in December, agricultural export prices increased 0.2% in January. Over the past 12 months, agricultural export prices advanced 2.2%. Meanwhile, nonagricultural export prices rose 0.7% in January. Higher prices for capital goods, nonagricultural industrial supplies and materials, consumer goods and automotive vehicles led the gain. Over the past year, nonagricultural export prices advanced 2.7%.

The S&P Global Manufacturing PMI was 51.6 in February, down from the January reading of 52.4. New orders rose in February, but at a slower pace than the prior month. At the same time, exports declined for the eighth consecutive month as tariffs continued to drive up costs and hurt demand from Canada. Prices on inputs increased but at a slower rate than in January, while selling price inflation fell to a 14-month low. In sum, the rate of inflation remains elevated from a historical context in February but is lower than recent peaks.

Production rose at the weakest rate since September, and combined with marginal gains in sales, caused stocks of finished goods to remain unchanged following six months of accumulation. Employment gains were weak in February as backlogs of work declined. Meanwhile, vendor performance continued to worsen as a result of low stock availability, transportation delays and adverse weather.

Expectations of new product launches and business expansion plans led firm confidence to rise to its highest level in eight months in February. Despite the gain in optimism, uncertainty over the political environment and the tariff picture continued to be a drag on hiring and investment, and that uncertainty doesn’t seem likely to abate soon.

In February, growth in global manufacturing activity strengthened from January, rising from 50.9 to 51.9, a 44-month high. Output and new orders both expanded as production rose at the fastest pace since December 2021 and growth in new orders hit a four-year high. New export orders increased as international trade volumes improved for the first time since March 2025 but continued to contract in the U.S and eurozone. Meanwhile, lead times continued to slow, lengthening for the 21st consecutive month. Employment grew for the second consecutive month, although gains were minimal.

India, Taiwan, the Philippines and Greece had the highest PMI readings in February. On the other hand, Mexico, Brazil and Russia were some of the larger nations to register declines in activity. The upturn in manufacturing occurred across consumer, intermediate and investment goods in February, with rates of expansion improving for the intermediate and investment goods sectors.

Meanwhile, input price pressures strengthened in February, jumping to a 39-month high, while output prices rose at a slightly slower rate. Forward-looking indicators remained positive, with business optimism hitting a 21-month high and climbing above long-run averages for the first time since March 2024. Notable improvements in Japan, China, the eurozone and the U.S. helped buoy this increased optimism.

In February, the U.S. manufacturing sector expanded for the second consecutive month but at a slightly slower pace than the prior month, with the ISM Manufacturing® PMI decreasing to 52.4% from 52.6% in January. Demand indicators remained in expansion territory, with the New Orders, New Export Orders and Backlog of Orders Indexes at 55.8%, 50.3% and 56.6%, respectively. Meanwhile, the Customers’ Inventories Index continued to contract into “too low” territory, ticking up 0.1 percentage point to 38.8, which is also a positive sign for future production. Meanwhile, the Production Index expanded at a slower pace in February, decreasing from 55.9% to 53.5%.

The New Orders Index expanded for a second consecutive month in February but at a slower pace, falling 1.3 percentage points from January. Of the six largest manufacturing sectors, four—machinery, transportation equipment, chemical products and computer and electronic products—reported an increase in new orders. In a turnaround from recent months, respondents noted optimism about near-term demand.

The New Export Orders Index expanded for a second consecutive month in February and at a slightly faster pace, 0.1 percentage point higher than January. Nonetheless, respondents remain concerned about trade frictions, with a negative comment for every positive comment. Meanwhile, the Imports Index expanded for the first time since March, up 4.9 percentage points from January to 54.9%, the highest increase since February 2022.

The Employment Index contracted for the 13th consecutive month but at a slower pace than the prior month, up 0.7 percentage points from January to 48.8%. Of the six largest manufacturing sectors, two—transportation equipment and machinery—reported increased employment. Companies focused on holding off on filling open positions to restrict headcounts due to uncertainty around near- to mid-term demand. For every comment on hiring, 1.4 respondents noted reduced headcounts.

The Prices Index surged 11.5 percentage points from January to 70.5%, indicating raw materials prices grew for the 17th straight month in February and at a much faster pace than the prior month. Of the six largest manufacturing sectors, all reported increased prices. The increase continues to be driven by higher steel and aluminum prices impacting the entire supply chain, as well as the tariffs applied to most imported goods. Roughly 45.4% of companies reported paying higher prices, up from 29.0% in January and from 21.0% in January 2025.

In December, the S&P Cotality Case-Shiller U.S. National Home Price NSA Index recorded a 1.3% annual gain, down from the 1.4% gain in November and the weakest full year gain since 2011. The 10-City Composite increased 1.9%, down from 2.0% the previous month, while the 20-City Composite rose 1.4% year-over-year, consistent with November’s gain. Among the 20 cities, Chicago again posted the highest annual gain at 5.3%, followed by New York at 5.1% and Cleveland at 4.0%. Meanwhile, Tampa again posted the lowest annual return, with prices falling 2.9%.

On a month-over-month basis, the U.S. National Index declined 0.3% before seasonal adjustment. At the same time, the 10-City Composite and 20-City Composite both edged down 0.1%. After seasonal adjustment, the U.S. National Index rose 0.4%, while the 10-City and 20-City Composites both grew 0.5%. The Northeast and Midwest continued to outperform other regions as the second half of the year exhibited weaker price growth. Meanwhile, in addition to Tampa, the Sun Belt market kept declining, including Denver (down 2.1%), Phoenix (down 1.5%), Dallas (down 1.5%) and Miami (down 1.5%).

The combination of high financing costs and prices continued to cap growth. Before seasonal adjustment, 15 of the 20 major metro areas saw price declines in December. Over the year, home prices trailed inflation. In comparison, home prices outpaced inflation by 3.7 percentage points over the prior decade, a trend that reversed starting in June 2025.

Consumer confidence increased 2.2 points in February to 91.2. Among its components, the Present Situation Index declined while the Expectations Index rose as consumers’ concerns regarding the present situation worsened, and concerns about the future eased.

The Present Situation Index, reflecting current business and labor market conditions, declined 1.8 points to 120.0. Meanwhile, the Expectations Index, which reflects consumers’ short-term outlook for income, business and labor market conditions, rose 4.8 points to 72.0, remaining below the recession signal threshold of 80 since February 2025.

Views of the current labor market situation improved slightly, with 28.0% of consumers saying jobs were “plentiful,” up from January (25.8%), while 20.6% said jobs were “hard to get,” up from January (19.0%). Looking to the future, 15.7% said they expect more jobs to be available, up from 14.8% the prior month, while 26.1% anticipate fewer jobs, down from 28.7% the previous month.

Mentions of high prices, inflation, trade and politics continued to top the list of topics influencing consumers’ views of the economy. At the same time, mentions of the labor market eased somewhat in February, while comments about immigration increased. Consumers’ 12-month inflation expectations remained elevated but were little changed from January, and the proportion of consumers expecting interest rates to remain high persisted. At the same time, the share of consumers who believe a recession “very likely” over the next year fell, and the small share thinking the economy is already in a recession dipped.

Buying plans for new cars stayed the same in February, while purchasing plans for homes were little changed, although they remained above levels seen a year ago. Consumers’ plans for buying big-ticket items overall improved in February, with used cars, furniture, TVs and smartphones remaining the most popular items among consumers. On the other hand, consumers’ intentions to purchase more services declined overall; however, restaurants, bars and take-out remained the top planned service spending category and edged up in February. Overall, consumers’ views of their current financial situation worsened after surging in January, and views of their future financial situation remained weak.

The Producer Price Index for final demand (also known as wholesale prices) rose 0.5% over the month in January, after prices moved up 0.4% in December. Over the year, producer prices increased 2.9% in January, down from 3.0% in December. Meanwhile, prices for final demand excluding foods, energy and trade services ticked up 0.3% over the month in January after rising the same amount in December. Prices for these goods advanced 3.4% from January 2025.

Within final demand, prices for services jumped 0.8% in January, the largest gain since July, after advancing 0.7% in December. Meanwhile, prices for goods decreased 0.3% in January, after edging down 0.1% in December. Within the final demand services index, margins for professional and commercial equipment wholesaling surged 14.4%, accounting for more than 20% of the January increase. Within the final demand goods index, prices for gasoline fell 5.5%, accounting for nearly 80% of the January decline.

Prices for processed goods for intermediate demand stayed the same in January, consistent with the lack of movement in December. Within the index, prices for nonferrous metals soared 4.8% and 32.9% over the year, while the index for gasoline fell 5.5% and 15.7% year-over-year. Meanwhile, prices for industrial electric power dropped 2.9% from December but increased 3.0% from January 2025. Over the year, the index rose 2.6% after a 3.5% increase in December.

Meanwhile, prices for unprocessed goods for intermediate demand decreased 0.5% in January, after moving up 1.9% in December. The monthly decline was led by a 9.8% drop in raw milk, which plummeted 29.2% over the year. In contrast, prices for nonferrous scrap soared 8.5% in January and 42.3% from January 2025. Over the year, prices for unprocessed goods for intermediate demand decreased 6.1%, the largest 12-month drop since September 2024, after ticking down 0.5% in December.

Manufacturing activity increased in the Tenth District in February, with the month-over-month composite index rising to 5 in February from 0 in January. Meanwhile, expectations for future activity jumped 8 points to 15. The month-over-month activity gain was due to an increase in durable manufacturing, which offset a decline in nondurable manufacturing. At the same time, the new orders index improved in February. The employment index was the only index to be negative this month. The Tenth Federal Reserve District encompasses the western third of Missouri; all of Kansas, Colorado, Nebraska, Oklahoma and Wyoming; and the northern half of New Mexico.

The production and shipments indexes turned positive, rising from -2 to 10 and from -2 to 11, respectively. Meanwhile, new orders jumped to 7, expanding for the first time since September. The employment index fell from 0 to -6, while the average employee workweek index ticked up from 4 to 6. The backlog of orders index turned positive for the first time in over a year, climbing from -11 to 8. At the same time, the pace of growth for prices paid and prices received both weakened slightly, with raw materials prices decreasing 2 points to 42 and prices received edging down 1 point to 18. On the other hand, over the year, the indexes for prices received and paid both increased, moving up to 58 and 81, respectively.

In February, survey respondents were asked special questions about their ability to pass through prices and the frequency of price changes. Nearly one-third of the firms (30%) reported they are able to pass through only up to 20% of higher costs from inputs and labor. Additionally, 10% can pass through 20% to 40%, 15% are able to pass through 40% to 60%, 13% can pass through 60% to 80% and 28% said they can pass through 80% to 100% of the increased cost from inputs and labor. When asked about price changes, 12% of firms reported they are changing prices much more often than last year, 36% somewhat more often, 4% somewhat less often and 2% much less often. At the same time, 46% of firms reported no change in the frequency of price changes compared to last year.

Manufacturing activity in the Fifth District contracted in February and at a faster pace than the previous month, with the composite manufacturing index decreasing from -6 to -10. At the same time, the local business conditions index declined from -8 in January to -15 in February. Despite current weakness, manufacturers are more optimistic about the future, with the outlook for future local business conditions rising from 19 in January to 22 in February. The Fifth District consists of Virginia, Maryland, the Carolinas, the District of Columbia and most of West Virginia.

Among its components, shipments and new orders remained negative and contracted at a faster pace, falling from -5 to -13 and from -6 to -9, respectively. The indexes for employment and vendor lead times ticked down, moving from -6 to -7 and from 0 to -1, respectively. Meanwhile, the share of firms reporting backlogs worsened, edging down from -13 to -14. On the other hand, the average growth rate of prices paid and prices received slowed in February.

Looking ahead, firms expect both price indexes to increase in the next 12 months but at a slower pace than forecasted in January. Expectations for future shipments and new orders remained positive but ticked down from 34 to 29 and from 36 to 35, respectively. Expectations for backlogs grew from 4 to 6. Meanwhile, firms’ expectations about equipment and software spending turned positive, increasing from -3 to -2. In sum, businesses in the Fifth District remained optimistic about future business conditions and investment plans.