U.S. manufacturing activity slid to its lowest level of 2025 in December as weak demand, persistent tariff uncertainty, and ongoing global economic pressures continued to squeeze factories nationwide.
According to the Institute for Supply Management (ISM) latest Manufacturing Purchasing Managers’ Index (PMI) reading, the sector remained in contraction territory at 47.9%, marking contraction for the tenth straight month. A PMI below 50 indicates shrinking manufacturing output.
Tariff Pressures and Demand Headwinds Drag Sector Down
The ISM report highlighted that although certain demand indicators such as new orders and export orders showed modest improvements, these gains were insufficient to offset overall contraction. Executive respondents repeatedly cited tariff uncertainty as a significant barrier to international sales, contributing to softer order books and subdued business sentiment.
Manufacturers also noted continued weakness in major categories outside of tech-driven segments like computer and electronic products, which enjoyed limited expansion during the year. Most other sectors, including transportation equipment and chemical products, reported declines throughout much of 2025.
Employment and Supply Chain Indicators Reflect Strain
Alongside declining output, employment in the manufacturing sector contracted as companies managed headcounts amid lackluster demand. Slower supplier deliveries and low inventory levels were also flagged by respondents, potentially signaling future production challenges if demand does not rebound.
Outlook and Broader Economic Context
The contraction in U.S. factory activity mirrors broader trends noted across global manufacturing, where weak demand and policy-induced costs continue to temper growth.
Industry analysts warn that without clearer trade policies and stronger demand signals, manufacturers may face prolonged softness in production and investment.
