The Institute for Supply Management released its monthly manufacturing Purchasing Managers Index (PMI) on Jan. 5, reflecting December U.S. industrial activity, which moved further into contraction for a third straight month.

The PMI — regarded as a key of U.S. industrial health — 0.3 percentage points during December to a reading of 47.9%, following declines of 0.4 and 0.5 in November and October, respectively. It was the lowest reading of 2025 and lowest since October 2024’s 46.9%.

It marked the 10th straight month that the PMI was in contraction territory, and the 37th contraction month in the past 39.

ISM PMI — Last 12 Months

ISM’s December report was led by decreases in the PMI’s subindexes for production (-0.4) and inventories (-3.7) after gains for both in November. Those outweighed gains in new orders (0.3), employment (0.9) and supplier deliveries (1.5), while prices held steady. As far as trends, December saw new orders for a fourth straight month; employment contracted for an 11th straight month; and inventories contracted for an eighth straight month; while production grew for a second straight month.

“Those two subindexes (production and inventories) increased in November, so their contraction this month continues the short-term “bubble” of improvement indicative in the last several months of PMI®data — and a hallmark of recent economic uncertainty in manufacturing,” commented Susan Spence, MBA, Chair of the ISM Manufacturing Business Survey Committee.

The report noted that 85% of the U.S. manufacturing economy’s GDP contracted in December, compared to 58% in November and October — and the percentage of GDP in strong contraction (PMI of 45% or lower) increased to 43% after November’s 39%.

Of the six largest manufacturing industries, only Computer & Electronic products expanded in December. It and Electrical Equipment, Appliances & Components were the only two industries overall to show growth in December, with the other 15 reporting contraction.

December ISM PMI Respondent Commentary

• “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 percent 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 percent due to tariffs. The lost revenue has inhibited our ability to offer bonuses to employees or create and hire for new positions.” [Miscellaneous Manufacturing]