Industrial Production Posts Strongest Gain in Nearly a Year as Business Equipment Orders Rise

Federal Reserve and Census Bureau data point to firmer factory activity and steady capital investment entering 2026.

By yourNEWS Media Newsroom

U.S. industrial production recorded its largest monthly increase in nearly a year in January, while new orders for key categories of business equipment exceeded expectations in December, signaling resilient capital spending and signs of stabilization in domestic manufacturing.

According to the Federal Reserve’s G.17 report released Feb. 18, industrial production rose 0.7 percent in January following a 0.2 percent increase in December. The gain marks a notable improvement from the prior six months, which included a 0.4 percent contraction in October.

Manufacturing output, which represents roughly three-quarters of total industrial production, advanced 0.6 percent in January — its strongest increase since February 2025. Growth was broad-based across industry groups.

Durable goods manufacturing rose 0.8 percent, with gains reported in nearly every category. Motor vehicles and parts production increased for the first time in five months.

Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets, said the earlier strength in artificial intelligence-related investment helped sustain business spending through much of the year, with other sectors beginning to increase activity late in 2025.

“After the AI boom sustained the business spending category of GDP in the first three quarters of the year, firms outside of the tech space began to reengage late last year, setting the stage for a noticeable pickup in investment outlays in 2026,” Stanley said. “This has been and continues to be my main justification for expecting an above-consensus economic performance in 2026.”

Output gains were recorded across all major market groups in January. Consumer goods production rose 0.7 percent, while business equipment increased 0.9 percent. Capacity utilization climbed to 76.2 percent from 75.7 percent in December, though it remains below its long-term average.

Separate data released Feb. 18 by the Commerce Department’s Census Bureau showed that orders for non-defense capital goods excluding aircraft — often referred to as core capital goods — rose 0.6 percent in December. Economists had forecast a 0.4 percent increase. November’s figure was revised upward to 0.8 percent.

Shipments of core capital goods rose 0.9 percent in December following a 0.2 percent gain in November. These shipments directly feed into the equipment component of gross domestic product and are closely watched as a measure of business investment.

However, overall durable goods orders declined 1.4 percent in December to $319.6 billion, weighed down by a 5.3 percent drop in transportation equipment orders.

The durable goods report was issued ahead of the Bureau of Economic Analysis’ advance estimate of fourth-quarter gross domestic product. Economists surveyed by Reuters expect the economy expanded at a 3.0 percent annualized rate in the fourth quarter, moderating from 4.4 percent growth in the third quarter.

Additional indicators suggest improving factory conditions. Manufacturing payrolls increased in January for the first time since late 2024. The Institute for Supply Management’s manufacturing index moved back into expansion territory, while S&P Global’s U.S. manufacturing purchasing managers index indicated the strongest pace of output growth since May 2022.

Freight data also indicate strengthening industrial momentum. Truckload volumes in the Midwest are approximately 8 percent higher than a year earlier, with gains concentrated in automotive and heavy machinery corridors including Detroit, Columbus, and Indianapolis. In contrast, freight flows linked to imports and port-adjacent hubs have shown relative softness.

Analysts often view freight trends as an early signal of broader industrial shifts because movements in raw materials and finished goods typically precede changes in employment and GDP.

Some measures remain mixed. Manufacturing construction spending has eased from last year’s peak, though it remains near historically elevated levels. Several regional Federal Reserve surveys reported uneven capital spending conditions late last year, though contacts in multiple districts indicated expectations for stronger activity in 2026.