Episode #47: Signs of a 2026 Manufacturing Breakout: PMI Up, Freight Tightening, Policy Aligning
In this episode of U.S. Manufacturing Today, Matt Horine argues that U.S. manufacturing is seeing a real “vibe shift” and structural turn in early 2026, based on shop-floor signals rather than GDP. It highlights ISM Manufacturing PMI rising to 52.6 (expansion) with strong new orders, production, and rebuilding backlogs, plus buyers positioning ahead of anticipated tariff-related price changes. The host discusses supply-driven cooling in prices using real-time inflation readings and suggests this could give the Fed room to cut rates, lowering manufacturers’ cost of capital. Freight indicators (including the Bank of America Truckload Demand Indicator at 60.7 and analysis from FreightWaves’ Craig Fuller) are cited as confirming stronger industrial activity, with immigration enforcement potentially tightening freight labor. The episode ties momentum to policy and a broader global shift toward resilience, domestic capacity, and reindustrialization, and previews upcoming guests and resources on www.veryableops.com.
Links
- Navigating Trump 2.0
- Veryable Is Revitalizing U.S. Manufacturing
- Sign Up on the Veryable Platform
- Veryable Shop
Timestamps
- 00:00 Welcome + Why This Solo Episode Matters (A Real Shop-Floor Read)
- 00:48 The Vibe Shift: Structural Changes & Non-Linear Manufacturing Growth
- 02:38 PMI Breaks Back Into Expansion: New Orders, Output, Backlogs
- 04:46 Supply-Driven Deflation: Real-Time Inflation, Productivity, and the Fed Pivot
- 08:02 Freight as the Leading Indicator: Spot Rates, Truckload Demand, Tightening Capacity
- 09:29 Policy Tailwinds: Industrial Strategy, Incentives, Tariffs, and Domestic Investment
- 10:29 A New Global Order: Resilience Over Efficiency & Industrial Policy as Sovereignty
- 11:29 Why This Cycle Feels Different: Flexibility, AI, Local Supply Chains, Breakout Setup
- 12:50 Wrap-Up: What We’re Watching Next + Upcoming Guests & How to Follow
Episode Transcript
Matt Horine: [00:00:00] Welcome back to US Manufacturing Today, the podcast powered by Veryable where we talk with the leaders, innovators, and change makers, shaping the future of American industry, along with providing regular updates on the state of manufacturing, the changing landscape policies and more.
Today's a solo episode to catch up on a few of the headlines and what appears to be taking shape not only at the macro level, but on the shop floor. This isn't an economics forecast where we hail the Almighty GDP or talk about big investment. No quarterly talking points, but something that feels real.
And if you're on socials like LinkedIn or X, you may be starting to get a sense that there is a tide turning. Most people have known that manufacturing has been in a softer session for at least a couple of years. Revised job numbers. Fake job numbers, people talking big picture, but nothing really tangible.
But if you've been paying attention, the vibe shift is real. And what we've started to notice on this show is that we're seeing structural changes starting to take shape. For starters, the year over year job numbers are something to behold. I saw a chart from [00:01:00] the Bureau of Labor Statistics and sourced from EJ Tony on X, that captures what has happened in private employment, a complete inversion of private sector job growth, which exploded this year compared to January of 2025.
A massive reduction in federal workforce. This is the kind of stuff you begin to feel on the ground, on the shop floor and freight lanes, and order books and production schedules that are starting to tighten again. It's clear something important is happening right now, and we need to benchmark this.
Hopefully this is the episode we can look back to when inflation stabilizes and manufacturing begins to take. 'cause the numbers are showing manufacturing is setting up for a breakout year, and it's not being driven by necessarily one factor. It's the convergence of policy, labor strategy, economic realignment, and a new operating model that rewards speed, flexibility, and domestic capability beyond GDP headlines.
For years, we've been told to look at GDP as the ultimate scorecard, but anyone actually running operations knows something different. Manufacturing doesn't grow in a straight line or a neat [00:02:00] number like GDP. It does grow and burst periods of quiet preparation and then sudden surges in demand. What we're seeing right now is the early phase of that surge.
The story isn't just about growth, it's about non-linear growth. The companies that win are the ones that can scale production quickly. When demand spikes, then adjust as quickly. When it cools, that means the old model. Fixed staffing, fixed capacity, fixed timelines don't really work anymore. The new model is built around how flexible can your operation be, and flexibility is becoming the single biggest competitive advantage in modern manufacturing, as we've seen on the show with a number of guests who've talked about it at scale.
To dive into it a little bit further, let's look at some of those numbers. The PMI signal is that expansion is back. One of the strongest signals that something is shifting came from the latest manufacturing PMI reading. The index moved above 50 to 52.6, which is an expansion territory. That number does matter.
Above 50 means growth. Below 50 means [00:03:00] contraction, and after a long stretch of uncertainty, that shift is also signaling new orders, picking up, reduction, accelerating, and backlogs starting to rebuild. That's the foundation of an industrial upswing. One of the most exciting pieces of data we've seen in that wasn't just that manufacturing return to expansion.
It's why it did in January of 26. ISM manufacturing PMI surge to 52.6 the first time in a full year that US factories moved back into that territory. That's a nearly five point jump from the prior month and the highest reading since 2022. But the headline number only tells part of the story. When we break down the sub indexes, we see what's really happening on the ground.
New orders lept to 57.1, the biggest gain in years, and a clear signal that firms aren't just producing, they're preparing for growth. Production expanded to 55.9. Also the strongest level in years, meaning factories are actually turning demand into output. Backlog orders move back into growth. A sign that order pipelines are [00:04:00] beginning to build and not just catching up and supplier delivery is slow to bed, which at PMI language actually means demand is rising faster than supply can keep.
At the same time, inventories continue to run lower, which paradoxically drive stronger new orders because customers are restocking and suppliers are racing to catch up. It's not really random noise. It's a coordinated signal of renewed demand, tightening capacity, and businesses reacting to real economic momentum.
And critically, part of the uptake appears to be driven by buyers getting ahead of anticipated changes in pricing due to policy shifts, including anticipated tariffs, which may have been priced in all along. They certainly are now, and that means companies aren't just reacting to demand that they're positioning themselves strategically for the year ahead.
That's a massive structural change. Other numbers that are very positive recently include inflation, cost inputs and margin. Let's talk about something many economists missed a tread. We began wagging in early fourth quarter, early fourth quarter last year, which is that deflationary [00:05:00] pressures emerging from production.
Expansion were beginning to take shape and not from a collapse in demand. Traditional inflation narratives focus on too much demand chasing too few goods, but this cycle is a little bit different. What we're seeing, especially in industrial and goods categories, is that supply is expanding faster than prices can adjust, and that is driving prices lower, not higher.
One of the best time realtime ways to see this is through an account called Truflation, which is an independent inflation gauge that aggregates tens of millions of daily price data points. Updating inflation in real time rather than on lagging monthly cycle, like official government reports, there's been a little bit of instability with that government reporting over the past couple months, and it's subject to shutdowns and other budgetary constraints.
So Trueflation's daily US CPI readings have recently shown inflation, low 1% on a daily basis in some snapshots under 0.8%, even while official data lags at above 2% and plus. [00:06:00] So what's going on here? Because manufacturing, productivity, and output capacity have expanded, especially in goods and freight related sectors.
Prices for produced goods are being pushed downward. That's exactly what supply side driven deflation looks like. More goods available, lower prices, stronger production capability. That's not really by accident. This matters for manufacturers because it highlights a critical evolution in the economy.
Deflation isn't a negative signal of collapsing demand. It is a positive signal of robust supply. This happened at other various points in history, primarily in the late 1880s and nineties, when at the time they were actually paired with tariffs. This is one of the strongest periods of tariffs in US history and when factories produce more efficiently and when competition and capacity grow, prices fall.
Consumers, supply chains and corporate margins all benefit. This is also why central banks are watching these data closely. Traditional CPI reports come out with weeks of delay, [00:07:00] but real-time majors show accelerating price cooling that simply hasn't shown up yet and lagged government figures. And that leads to one of the most important developments going on right now.
Monetary policy may be able to pivot from restrictive to supportive sooner than most expect. If inflation, at least in the price category is most relevant to production and consumption is indeed closer to 1%. That gives the Fed Room to cut rates lowering the cost of capital for manufacturers, investing in expansion, automation, or other innovation.
That's a powerful pro manufacturing tailwind. From what we're seeing, this price pressure is not coming from weak demand. It's coming from increased production and productive capacity, exactly where you want it. If you're in manufacturing. More supply. At lower cost means products move faster. Global competitiveness increases, and the US producer once again gains pricing power.
This is a manufacturing driven deflation and is one of the underappreciated [00:08:00] drivers of the positive economic backdrop. We're starting to see take, take shape in 2026 to look at that more closely and where those signs are first starting to show up. Freight is really starting to tell the story. If you wanna understand where manufacturing is going.
Watch freight. A highly recommended follow on x Craig Fuller of freight waves. His handle is @freightalley, by the way, has been tracking the shift and where spot rates are climbing and Tinder rejections are being felt the most. His analysis is spot on. It's being led out of the production heartland in the Midwest because of the industrial sector.
To further support the PMI reporting, he cited the Bank of America Truckload Demand Indicator, a biweekly survey that tracks shippers on freight demand over the 90 day window. And as of early February, it signaled a shift to growth with a score of 60.7 breaking above the 60 growth signal level. For the first time, again, since April of 2022, freight is really the heartbeat of production and the signals coming out right now are encouraging.
Activity is stabilizing [00:09:00] movement, improving and demand signals are still getting stronger. When freight firms up, it usually means production is following and when production follows, the investment actually lands and follows as well. There are also some other signs in the free sector, higher immigration enforcement.
In one of our first episodes that we highlighted with American Truckers United flagged this issue. Right at the outset, and now it is being enforced at many state levels and most importantly, at the federal level, which will tighten the freight market in a way that drives up wages and stops labor.
Dumping all this points to policy tailwinds, aligning. We're seeing the alignment that supports domestic production. There's growing focus on economic sovereignty, domestic capacity, supply chain resilience, and industrial investment. Large legislative packages are creating incentives for capital investment modernization, and domestic expansion.
At the same time, we're seeing a broader belief that tariffs can help stabilize domestic industry. Economic independence strengthens national resilience and strategic production [00:10:00] capacity matters. Now more than ever, these shifts are helping create an environment where manufacturers can invest with more confidence.
The calls on our show over the past couple of months have been for policy makers to make real impactful change with a national industrial strategy. It's there and there are plenty of indicators that it will be bolstered. We have a great guest coming in the next few weeks working on re industrializing our medical supply chain with great outlook for legislative potential with an organization called Manufacturing Renaissance that is drafting bills as we speak.
Finally, what does that all mean in terms of the global market? A new global order is starting to take shape. For decades, the global economy was built on one central idea that only efficiency mattered above everything else. But that model did create fragility. Now we're seeing a real shift toward resilience, over dependency, domestic production, over distance sourcing, chasing prices, and stability over pure cost optimization.
It's not a short term trend, it's a structural change in something that is a new world and manufacturers are at the center of it. [00:11:00] Industrial policy equals national sovereignty, and I'd point our listeners to read the National Security Strategy document published in November that specifically highlights reindustrialization.
We'll be sure to link it in the comments. It's A PDF and some white reading, and additionally industrial policy made its way to the annual Munich Security Conference. Secretary of State, Marco Rubio gave a big policy interest about industrialization being at the core of Western values. Really big stuff there that's pointing in the right direction towards a new economic reality.
Why does it feel different this time? This moment feels different than past cycles because it's not just demand returning. It's an entire operating philosophy. Changing. Companies are learning to scale faster, adapt quicker, make decisions with better data, powered by artificial intelligence and build supply chains closer to home.
As a recent guest told us, local is preferred in 100% of cases where it is viable. The organizations that commit early to flexibility and domestic capability now have first mover advantage, and everyone else [00:12:00] will be catching up with this realignment over the coming months. All in all, we have a pretty high confidence outlook, and when you put all the signals together, you're starting to see expansion readings, returning freight, stabilizing and tightening in the right way, investment incentives, growing flexible labor models, gaining adoption and domestic production becoming more strategic.
You start to get a clear picture that manufacturing isn't just recovering, but it's positioning for an acceleration. There's a renewed sense of competence in American industry and something that we see on the shop floor every day. A belief that production matters, capability matters, and the people building things every day still form the backbone of the economy.
The next phase won't be defined by slow, steady growth. It'll be defined by rapid scaling, operational agility, and a new generation of manufacturers who understand how to move quickly. And if the early signals are right, this could be the year that manufacturing breaks out. We'll keep tracking those signals, the momentum and the people driving.
This next era, we have some exciting guests coming up, some who called these big ships, early operators who are on the [00:13:00] ground changing the world we live in, and people making a difference in reindustrialization of the United States, so beyond the lookout for those episodes coming up. And thank you as always for listening to US manufacturing today.
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