ISM: Manufacturing Contracts Again in December

In December, economic activity in the manufacturing sector contracted for the 10th consecutive month, according to the latest ISM Manufacturing PMI Report. issued on January 5.

This followed a two-month expansion preceded by 26 straight months of contraction.

The Manufacturing PMI registered 47.9% in December, a 0.3-percentage point decrease compared to the reading of 48.2% percent in November and the lowest reading of 2025.

The overall economy continued to expand for the 68th consecutive month, following a contraction in April 2020. 

"Looking at the manufacturing economy, 85% of the sector's  GDP contracted in December, compared to 58% in November, and the percentage of manufacturing GDP in strong contraction (defined as a composite PMI of 45% or lower) increased to 43%, compared to 39% in November," said. Susan Spence, chair of the ISM Manufacturing Business Survey Committee, in a statement. "The share of sector GDP with a PMI at or below 45% is a good metric to gauge overall manufacturing weakness. Of the six largest manufacturing industries, only computer & electronic products expanded in December." 

Index reports are as follows:

Supplier Deliveries indicated slower delivery performance after one month in 'faster' territory. The reading of 50.8% is up 1.5 percentage points from the 49.3% recorded in November.

Inventories registered 45.2%, down 3.7 percentage points compared to November's reading of 48.9%.

New Export Orders reading of 46.8% is 0.6 percentage point higher than the reading of 46.2% registered in November.

Imports registered 44.6%, 4.3 percentage points lower than November's reading of 48.9%

New Orders contracted for a fourth straight month in December following one month of growth; the figure of 47.7% is 0.3 percentage point higher than the 47.4% recorded in November.

Production  (51%) is 0.4 percentage point lower than November's figure of 51.4%. 

Prices remained in expansion (or 'increasing' territory), registering 58.5%, the same as November's reading. 

Backlog of Orders  registered 45.8% up 1.8 percentage points compared to the 44% recorded in November. 

Employment registered 44.9%, up 0.9 percentage point from November's figure of 44%.

What Respondents are Saying

"Winding up the year with mixed results. It has not been a great year. We have had some success holding the line on costs; however, real consumer spending is down and tariffs are ultimately to blame. I hope for some return to free trade, which is what consumers have 'voted for' with their spending." [Chemical Products]

"Trough conditions continue: depressed business activity, some seasonal but largely impacted by customer issues due to interest rates, tariffs, low oil commodity pricing and limited housing starts." [Machinery]

"Things are quieter regarding tariffs, but prices for all products remain higher. Our costs have increased, so we have increased prices for our customers to compensate. Margins have deteriorated, as full pass through (of cost increases) is not possible." [Computer & Electronic Products]

"Things are not improving in the transportation equipment market. Many customers are ordering for 2026, but those orders are 20 percent to 30 percent below their historical buying patterns. Some large fleets are still completely on hold for 2026, with zero capital expenditures money available to fleet budgets. Truck rental utilization, which is a good benchmark for the health of the economy, is still below historically stable levels. The general mood of the industry is that the first half of 2026 will be another bust, and we're now hoping things pick up in the second half, even as the North American truck fleet continues to age." [Transportation Equipment]

"In the current environment, our company is struggling with customer orders and financially overall. Our senior leaders are struggling to focus our business and get the company on track with quality products. In November, layoffs impacted about 9 percent of our workforce, affecting all locations in the U.S. and Europe." [Machinery]

"Orders continue to drop for most of our businesses. Many plants are not running near full capacity. Make to order being utilized where possible." [Chemical Products]

"Order levels have continued to decline: We had a bad October, an awful November and a dismal December. January and February don't look too good, as bookings are down 25% compared to the first two months of 2025." [Fabricated Metal Products]

"Morale is very low across manufacturing in general. The cost of living is very high, and component costs are increasing with folks citing tariffs and other price increases. It's cold in our area of the country, absenteeism is worse around the holidays, and sales were lower than we expected for November. So, things look a bit bleak overall." [Electrical Equipment, Appliances & Components]

"Global logistics remains sensitive to geopolitical shifts. Tariffs are influencing equipment pricing and procurement strategies. Large-scale data center programs are absorbing and reducing availability of resources for other sectors." [Food, Beverage & Tobacco Products]

"2025 revenue was down 17% due to tariffs. The lost revenue has inhibited our ability to offer bonuses to employees or create and hire for new positions." [Miscellaneous Manufacturing]