Implications: Industrial production started 2026 on a healthy note, posting the largest monthly gain in nearly a year and beating consensus expectations. More broadly, industrial production is up 2.2% in the past year despite huge shifts in trade policy and tariff uncertainty that coincided with the Trump Administration taking office. Meanwhile, the manufacturing sector is up an even stronger 2.5% in the past year. While these numbers may seem modest, they represent the fastest 12-month growth rates for those series since 2022 during the COVID reopening. Digging into the details for January, manufacturing was the biggest source of strength, rising 0.6%. The volatile auto sector contributed to the gain, with activity jumping 1.4% in January.  Manufacturing ex-autos (which we think of as a “core” version of industrial production) also posted a gain of 0.5%. The typical bright spots in the “core” measure were present in today’s report as well.  Production in high-tech equipment, which has been a reliable tailwind recently due to investment in AI as well as the reshoring of semiconductor production, increased 1.9% in January.  High-tech manufacturing is up a strong 8.9% in the past year and has typically posted the fastest 12-month growth rate of any category. However, the manufacturing of business equipment overtook it in January, up 9.4% in the past year, signaling reindustrialization in the US outside of just the high-tech industries mentioned above. Utilities output (which is volatile and largely dependent on weather), was also a tailwind in January, rising 2.1%. Finally, the mining sector was a minor drag on growth in January, declining 0.2%. Declines in oil and gas production and the drilling of new wells more than offset a gain in the extraction of other metals and minerals.  In other recent manufacturing news, the Empire State Index – a measure of factory sentiment in the New York region – declined slightly to +7.1 in February from +7.7 in January.

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