ISM PMI falls to 47.9% as manufacturing contraction accelerates

The Institute for Supply Management’s manufacturing PMI fell by a third of a point to 47.9% in December, indicating yet another month of contraction in U.S. manufacturing. The headline measurement for the manufacturing economy fell slightly faster than in November after indexes for new orders and employment fell and a third index showed supplier deliveries slowing down further. December marks two years and two months since the manufacturing sector last grew, according to ISM data.

The ISM reports that its index of manufacturing employment and new orders both increased by 0.9 and 0.3 points, respectively. Despite the improvement, both indexes remained beneath 50%, indicating both measures are shrinking at a slower rate. A third measure, production, fell by 0.4 points to 51.0%, indicating production is still growing, but at a slower rate relative to November.

According to an ISM survey of manufacturing executives, electrical equipment and appliance companies and computer and electronics companies both reported growth in December. The survey’s fifteen other subcategories of manufacturing reported worsening business conditions. In reported comments, surveyed executives blamed tariffs for increased prices, unstable geopolitics, and low production utilization.

What people are saying

“In December, U.S. manufacturing activity contracted at a faster rate, with pullbacks in the Production and Inventories indexes leading to the 0.3-percentage point decrease of the Manufacturing PMI,” said Susan Spence, Chair of the ISM’s Manufacturing Business Survey Committee. “Those two subindexes 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.”

“Things are quieter regarding tariffs, but prices for all products remain higher,” reported an anonymous Computer & Electronics company executive. “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.”

“Things are not improving in the transportation equipment market,” said an anonymous Transportation Equipment company executive. “Many customers are ordering for 2026, but those orders are 20% to 30% 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.”

Investing in American manufacturing in 2025 

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