U.S. manufacturing activity decreased to its lowest point of 2025 last month, affected by continued tariff uncertainty and weak demand, according to the Institute for Supply Management’s latest Purchasing Managers’ Index.

ISM’s index registered 47.9% in December, down 0.3 percentage points compared with November. A PMI index below 50% shows an industry in contraction.

Despite improvements in three of the four main demand areas — including new orders, backlog of orders and new export orders — the indexes continued to be in contraction as they have been for months. Meanwhile, production slipped 0.4 percentage points, but was in expansion for the second month in a row.

Susan Spence, chair of ISM’s Manufacturing Business Survey Committee, said on a call with reporters Monday that the demand improvements are good, but the question remains if this could be the start of a turnaround or “just another blip.” She also noted that production expansion is likely in a “bubble” following four months of new orders in contraction.

“When new orders start turning around and expand for more than a month at a time — one, two, three, four, five months — then you’re going to see it flow to production and backlog, and then everything should follow,” Spence said.Last month, new orders expanded in two of the 18 manufacturing sectors that ISM tracks, and only one of them was in computer and electronic products, which has seen major growth last year driven by data center buildouts to accommodate artificial intelligence demand.

Surveyed panelists cited tariffs as the biggest issue for them last month. Executive participants reported softer international orders as uncertainty around U.S. economic policy continues, Spence said, citing a ratio of 1.5 negative comments for every positive one regarding export orders.

Separately, employment contracted at a slower rate, with a majority of panelists saying that their companies are managing head counts instead of hiring. Additionally, supplier deliveries are slower compared to November and customer inventories are in the “too low” category, which can be a positive indicator for future production.

A mix of staff reductions, a lack of backfilling and continued price increases signals “that we’re still in a struggling economy,” Spence said. Compared to the overall economy, which has grown steadily every month since April 2020, the manufacturing sector has contracted for most of 2025.

By: DocMemory
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