Manufacturing activity saw contraction in December, for the 10th consecutive month, according to the new edition of the Manufacturing Report on Business, which was issued today by the Institute for Supply Management (ISM).
The report’s benchmark reading, the PMI, came in at 47.9 (a reading higher than 50 indicates growth), down 0.3% compared to November, contracting, at a faster rate, for the 10th consecutive months, with the overall economy growing, at a slower rate, for the 68th consecutive month.
The December PMI came in 1.0% below the 12-month average of 48.9, with January’s (2025) 50.9 and December’s 47.0 marking the respective high and low readings for that period.
ISM reported that two manufacturing sectors—Electrical Equipment, Appliances, & Components, and Computer & Electronic Products—saw growth in December. Sectors seeing contraction included: Apparel, Leather & Allied Products; Wood Products; Textile Mills; Paper Products; Chemical Products; Printing & Related Support Activities; Nonmetallic Mineral Products; Petroleum & Coal Products; Primary Metals; Miscellaneous Manufacturing; Plastics & Rubber Products; Fabricated Metal Products; Machinery; Food, Beverage & Tobacco Products; and Transportation Equipment.
ISM cited the following for the report’s key metrics in December:
- New Orders, at 47.7, inched up 0.3%, contracting, at a slower rate, for the fourth consecutive month, with the metric not seeing consistent growth since a 24-month stretch of growth ended in May 2022, with two sectors reporting growth;
- Production, at 51.0. slipped 0.4%, growing, at a slower rate, for the second consecutive month, with four sectors reporting growth;
- Employment, at 44.9, was up 0.9%, contracting, at a slower rate, for the 11th consecutive month, with three sectors reporting growth;
- Supplier Deliveries, at 50.8 (a reading over 50 indicates slower deliveries), saw a 1.5% increase, slowing, after faster growth in November, with eight sectors reporting slower deliveries;
- Inventories, at 45.2, decreased 3.7%, contracting, at a faster rate, for the eighth consecutive month, with two sectors reporting higher inventories;
- Customers’ Inventories, at 43.3, were down 1.4%, coming in too low, at a faster rate, for the eighth consecutive month; and
- Prices, at 58.5, were flat, increasing, at the same rate, for the 15th consecutive month, with 11 sectors reporting higher prices
Tariffs and the economy were once again the main themes cited in ISM panelists’ comments.
“Winding up the year with mixed results,” said a Chemical Products panelists. “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.”
A Transportation Equipment panelist explained that market conditions are not improving, noting that 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,” the panelist said. “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.”
In an interview with LM, Susan Spence, Chair of the ISM’s Manufacturing Business Survey Committee, observed that December wrapped up a year of manufacturing uncertainty, with December turning in 2025’s lowest PMI reading.
In looking at the top six manufacturing sectors—Chemical Products, Computer & Electronic Products, Machinery, Food, Beverage & Tobacco, Petroleum, and Transportation Equipment—Spence noted that Petroleum led the pack, expanding in nine months in 2025, while the sector represents only 5% of manufacturing GDP, whereas Chemical Products, which account for 20% of manufacturing GDP, saw only three months of expansion in 2025. Computer & Electronic Products saw growth in six months of 2025, she observed, and have been on an upward trajectory, paced largely by the buildout of AI-focused data centers.
“A major concern in this report is that 85% of the manufacturing sector was in contraction in December, up from 58% in November, with the percentage of manufacturing GDP in strong contraction [defined by ISM as 45% or lower] up to 43% and up compared to November’s 39%,” said Spence. “Overall, the sentiment is not great, nor is the employment picture. The December University of Michigan Consumer Sentiment Index reading at 52.9 was down from 74.0 in December 2024, too. These things together are not part of a positive trend [for manufacturing].”
