Steady Start for U.S. Business as Price Pressures Persist

24 January 2026

RACHEL WISNIEWSKI / Credit: REUTERS

January 2026 brought a muted but steady signal from the United States private sector, with business activity holding its ground even as cost pressures and labor market uncertainty weighed on confidence. According to the S&P Global flash Composite PMI, the gauge that tracks overall manufacturing and services sector activity edged down slightly to 52.8 from December’s 52.7, remaining above the expansion threshold but underscoring a tempered pace of growth in the new year. The performance suggested that the U.S. economy continued to operate in a zone of modest expansion rather than robust acceleration, as firms navigated a mix of opportunities and headwinds that left many cautious about the road ahead.

At the heart of January’s survey was an uptick in new business orders, a hopeful sign that demand within domestic markets was picking up after a slow end to 2025. The index measuring new orders climbed to 52.2 from 50.8 in December, pointing to renewed willingness among customers to commit to purchases of goods and services. For companies, this translated into a sense that spending intentions were stabilizing, even if broader economic momentum had not yet returned to the levels seen through much of last year.

Yet the backdrop was not without pressure. Export activity weakened, falling to a nine-month low as international demand softened and global cross-border trade dynamics remained uncertain. This drop reflected a divergence between domestic resilience and an external environment that continues to challenge U.S. producers and service providers seeking growth abroad. Firms cited geopolitical tensions and policy uncertainties as key factors tempering export prospects, adding another layer of complexity to strategic planning in an already unpredictable global marketplace.

Inflationary forces remained notably persistent, driven largely by the cost of imported goods. Both measures of price pressures what businesses charged for their own goods and services and what they paid for inputs stayed elevated. While the selling price index dipped slightly to 57.2 and the prices paid index eased to 59.7, both readings remained high by historical standards. Businesses attributed much of the sustained cost burden to import tariffs, which continue to elevate the costs of intermediate materials and final products. These conditions suggested that inflation, while not surging uncontrollably, was sticking stubbornly in the economic system, making it difficult for companies to ease price pressures or return to more normal margins.

Hiring patterns offered another mixed signal. Employment gauges in the PMI remained close to stagnant, with the index creeping only slightly from 50.3 to 50.5. Such figures indicate that job growth was tepid at best, reflecting a labor market still in search of clearer direction. Some firms expressed difficulty in finding suitable staff, a challenge that some analysts linked to tighter immigration policies that have reduced the labor supply in certain sectors. With employment growth not yet strong enough to lift overall confidence, companies were left balancing the need to expand operations with caution about future demand.

Business confidence overall took a slight dip, falling just below the average seen over the previous year. In the eyes of many executives, the combination of high costs, geopolitical uncertainty and ambiguous federal policy signals made planning for sustained growth more fraught than in recent quarters. Even with domestic activity showing resilience, the specter of external shocks and policy shifts loomed large in strategic discussions, influencing investment decisions and outlook statements from corporate leaders.

Amid these mixed business conditions, consumer sentiment offered a complementary picture of cautious optimism. A separate University of Michigan survey showed that consumer confidence improved in January, with the overall sentiment index rising to 56.4 from 54.0. The gain was broad-based, spanning income groups and political affiliations, but overall sentiment remained significantly below year-ago levels. Despite this lift, many households continued to feel the pinch of high prices and uncertainties about the job market, factors that could limit consumption growth even as some indicators brighten.

Looking ahead, the Federal Reserve is widely expected to hold interest rates steady for the time being, influenced by the delicate balance between inflation that remains too high for comfort and labor market dynamics that do not yet fully signal overheating or cooling. Policymakers will likely scrutinize future data on prices, employment and output as they calibrate monetary policy amid these mixed readings from the real economy.

In broader terms, January’s snapshot reinforced the view that the U.S. economy was navigating a complex transition. Growth was clearly present, but not uniform or robust enough to dispel a sense of caution among businesses and consumers alike. Costs continue to shape choices at every level of production and consumption, and firms are adapting in ways that emphasize endurance and flexibility over bold expansion. Whether this steady but unremarkable trajectory evolves into something stronger in the coming months will depend on how domestic demand, global conditions and policy responses interact in an environment still marked by uncertainty and change.