David Rosenberg, leader of Rosenberg Research and well-regarded economic analyst, recently issued a cautionary message regarding the state of the U.S. economy. His analysis identifies a significant gap between the headline economic statistics, including a reported 4.3% annualized increase in third-quarter real GDP, and the realities manifesting within the nation's industrial sectors.
The Bureau of Economic Analysis (BEA) presented the headline GDP growth, highlighting substantial contributions from government expenditures and consumer consumption. However, Rosenberg urges a deeper look beyond these aggregate figures to the ground-level economic activity, particularly the industrial sector metrics, which he finds far less encouraging.
Central to his argument is the Institute for Supply Management's (ISM) Manufacturing Report, which, as of December, revealed that a mere 11% of U.S. manufacturing industries reported any growth during the month. This statistic marked a sharp downturn from November's 22% and was considerably lower than last year's 39%. Rosenberg underscores the historical weight of this number, noting it is tied for the second-lowest proportion of growth among manufacturing industries since April 2009. During that period, the economy was still grappling with the depths of the Great Recession, reflecting extreme economic hardship.
The ISM report itself corroborates this contraction trend. Its Manufacturing Purchasing Managers’ Index (PMI) stood at 47.9% for December, extending its streak to ten months below the 50% threshold that separates contraction from expansion. Within the manufacturing sector, only two industries—Electrical Equipment, and Computer & Electronics Products—recorded any growth. The remaining sixteen industries experienced either stagnation or decline.
Rosenberg has expressed skepticism about the validity of the reported GDP expansion. Labeling the 4.3% figure a “fugazi” or false growth, he reasons that when adjusting for the effects of government spending and reduced personal savings, the actual underlying economic growth rate more closely aligns with a marginal 0.8%. This reflects a stagnant economy that may mask serious difficulties revealed by contracting industrial performance.
This disconnect raises concerns as the industrial base of the economy appears to be shrinking even as the GDP headline suggests expansion. Expansion driven primarily by government and consumer spending may not be sustainable if the core industrial sector continues to falter.
Drawing a historical parallel, Rosenberg highlights the similarity between current industrial growth participation metrics and those of April 2009—a time when the U.S. economy was still in deep recession. This comparison serves as a direct challenge to the prevailing market optimism, which, according to Bank of America’s December Global Fund Manager Survey, finds 94% of investors expecting a so-called “soft landing” or no economic downturn at all.
Investor confidence is reflected in market behavior, with cash allocations reaching historically low levels, indicating a strong preference to stay invested rather than hold liquidity. Rosenberg's analysis warns that this consensus optimism may underestimate the risks apparent in the manufacturing sector’s contraction and overall industrial weakness.
Despite these cautionary signs, the stock market's major benchmark indices demonstrated upward movement in early January 2026. The SPDR S&P 500 ETF Trust (ticker: SPY), which tracks the S&P 500 index, closed the first trading day of the year at $687.72, rising 0.67%. Similarly, the Invesco QQQ Trust ETF (ticker: QQQ), tracking the Nasdaq 100 index, advanced 0.79% to $617.99. Stock futures for the S&P 500, Dow Jones, and Nasdaq 100 also traded higher the following day.
These market gains suggest that despite industrial sector weakness and economic warnings, investor appetite remains positive in the opening days of 2026. However, the underlying industrial contraction and narrow breadth of economic growth indicate that caution is warranted, especially for stakeholders heavily reliant on the manufacturing sector's health.