Ulbrich Economic Update - Number 68 (January 2026)

Download the 13-page Economic Update for the full details of recent economic trends impacting all industries across the globe. Keep reading for the Executive Summary.

The U.S. Economy

ECONOMIC MOMENTUM SOFTENED INTO YEAR-END, with manufacturing activity contracting for a 10th straight month as the ISM Manufacturing PMI fell to 47.9 in December, the weakest reading of 2025. Consumer sentiment weakened further as the Conference Board Consumer Confidence Index declined to 89.1 in December. Hard data pointed to an uneven economy: factory output was flat in November after an October decline, with motor vehicle production easing as post–EV-tax-credit demand normalized, while core capital goods orders rose 0.5% and shipments increased 0.7% in October, signaling continued equipment spending supported in part by AI-related investment. Inflation moderated but remained elevated in key areas, with CPI up 2.7% year-over-year in November and core CPI up 2.6%, while energy inflation accelerated on a 12-month basis.

Retail sales were unexpectedly flat in October, though core retail sales jumped 0.8%, suggesting consumer spending remained supported by higher-income households even as affordability pressures weighed on lower- and middle-income buyers. The labor market showed a slow-growth profile, with payrolls rising 64,000 in November and the unemployment rate reported at 4.6% amid shutdown-related data distortions, while wage growth cooled to 3.5% year-over-year. Housing demand improved late in the month as pending home sales rose 3.3% in November to the strongest level in nearly three years, aided by lower mortgage rates, improving affordability, and higher inventory.

Steel Industry Updates

CONSOLIDATION, TRADE ENFORCEMENT, AND CAPACITY DECISIONS SET THE TONE, as service-center M&A accelerated with Varsteel expanding further into Canada and Russel Metals closing its $102M U.S. acquisition from Klöckner. In the U.S., lawmakers introduced the bipartisan STEEL Act to strengthen duty-evasion enforcement, while Commerce finalized corrosion resistant steel duty orders after a long-running case. On the production side, U.S. Steel approved a $350M reline at Gary Works and continued reshaping its asset base with the purchase of the former USS-POSCO site in California.

Automotive

HYBRIDS GAINED GROUND AS AUTONOMY MOVED CLOSER TO SCALE, with Ford reporting a 6% increase in U.S. vehicle sales driven by strong hybrid demand as EV momentum softened. Autonomous deployment advanced on multiple fronts, including federal lawmakers signaling renewed action on self-driving legislation, Mercedes-Benz preparing city-street driver assistance for U.S. launch, and Kodiak AI partnering with Bosch to move driverless trucking toward commercial scale. Battery strategy also adjusted, highlighted by LG Energy Solution’s $2.86B asset sale to Honda to streamline its Ohio joint venture.

Energy

POLICY UNCERTAINTY AND GRID CONSTRAINTS DOMINATED, as the U.S. paused leases for five offshore wind projects, prompting legal challenges from Equinor and Orsted and raising questions around long-term steel demand tied to offshore construction. At the same time, surging electricity demand from AI data centers forced utilities to keep aging peaker plants online, intensifying environmental and reliability debates across PJM and other major grids. Geopolitics stayed front and center as Washington outlined plans to control Venezuelan oil sales and revenues indefinitely, underscoring structural U.S. reliance on heavy crude imports.

Medical

REGULATORY CLARITY AND PIPELINE ACTIVITY STOOD OUT, with the FDA moving to limit oversight of low-risk wellness wearables while reinforcing boundaries around medical claims. On the deal side, Eli Lilly was reported to be in advanced talks to acquire Ventyx Biosciences for more than $1B, while Moderna secured up to $54.3M from CEPI to advance late-stage development of its mRNA bird flu vaccine, signaling renewed focus on pandemic preparedness heading into 2026.

Aerospace

SUPPLY-CHAIN CONTROL AND DEFENSE SPENDING REMAINED KEY DRIVERS, as Boeing closed its acquisition of Spirit AeroSystems, bringing critical fuselage and wing operations back under direct oversight amid ongoing quality concerns. Defense demand stayed elevated, with the Pentagon awarding Lockheed Martin a $328.5M Taiwan-related contract as part of a broader arms package. Investor attention also turned toward space, with sources saying SpaceX is preparing a potential 2026 IPO that could rank among the largest ever.

Commodities

STRUCTURAL SUPPLY CONSTRAINTS AND TRADE FLOWS SHAPED MARKETS, as copper neared record highs on renewed focus on mine tightness and long-term electrification demand. China’s trade surplus surpassed $1T for the first time, driven by redirected exports toward Europe and other Asian markets, heightening concerns over industrial overcapacity and potential trade responses. In agriculture, Brazil was set to overtake the U.S. as the world’s top beef producer.

Overseas

EXPORT CONTROLS, DEFENSE, AND ENERGY TRANSITION INVESTMENTS CONVERGED, with the U.S. approving annual 2026 licenses for Samsung Electronics and SK Hynix to ship chipmaking tools to China under a tighter review system. Washington also pressed the EU to exempt U.S. oil and gas from methane-import rules through 2035, a demand Brussels rejected as it defended its climate framework. In Asia, Japan advanced hydrogen infrastructure ambitions with Kawasaki signing a deal to build the world’s largest liquefied hydrogen carrier, reinforcing momentum behind long-term energy transition logistics.

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