#United States #Tempe #Manufacturing PMI #ISM #economic report

Overview of December 2025 ISM® Manufacturing PMI® Report

The latest ISM® Manufacturing PMI® Report has revealed a concerning contraction in the manufacturing sector, marking the 10th consecutive month of decline. The report, published by Susan Spence, Chair of the Institute for Supply Management® Manufacturing Business Survey Committee, indicates a PMI® reading of 47.9%, reflecting an ongoing trend of economic weakness in manufacturing. This figure, although slightly improved from November's 48.2%, represents the lowest PMI reading recorded in 2025.

Economic Overview

Following a brief period of expansion lasting two months, manufacturing activity has notably contracted for 26 months. Historically, a PMI® figure above 42.3% indicates economic growth; however, the recent numbers suggest a troubling downturn. In December, the New Orders Index also contracted for a fourth month in a row, landing at 47.7%, which is marginally better than November’s 47.4%. This decline raises questions about future production levels and overall demand.

Key Insights

The report presents several crucial insights:
1. Production Index: This registered at 51%, slightly down from 51.4% in November, indicating ongoing but slowed growth in production levels.
2. Employment Index: The Employment Index is at 44.9%, showing a contraction despite a slight improvement from the previous month's 44%. This points to challenges in the employment sector, with many companies continuing to focus on workforce reductions rather than hiring.
3. Supplier Deliveries: The Supplier Deliveries Index reflects slower delivery performance, consistent with a tightening manufacturing landscape. This mirrored condition may signal a move toward less inventory and tighter manufacturing schedules.
4. Inventories: The Inventories Index saw a drop to 45.2%, further emphasizing that many firms are reducing their stock levels in anticipation of waning demand.
5. Price Index: Despite the downturn, the Prices Index remains stable at 58.5%, indicating that raw material prices continue to rise, impacting profit margins and reflective of increased global supply chain challenges.

The State of Customer Inventories

Moreover, the Customers’ Inventories Index is concerningly low at 43.3%, which typically indicates a potential for future production. A low customer inventory often signifies that businesses may need to ramp up manufacturing again, assuming demand can stabilize.

Challenges Ahead

The overall sentiment shared by executives surveyed reflects significant unease within the sector. Comments indicated issues such as reduced consumer spending, elevated tariffs, and rising operational costs are contributing to a climate of uncertainty. Many firms reported struggling with orders and managing finances under these circumstances, leading to layoffs and continued efforts to stymie costs.

Sectoral Insights

Of interest, only two sectors—Electrical Equipment, Appliances & Components and Computer & Electronic Products—reported growth in December. Meanwhile, most sectors, including Transportation Equipment, Fabricated Metal Products, and Chemical Products, are facing continued contraction. This underscores a wider trend of challenges cutting across the manufacturing landscape, driven primarily by economic pressures and global uncertainties.

Outlook

As we progress into 2026, the narrative remains mixed. Although the PMI® data indicates negative trends, there may still be opportunities for recovery if demand indicators show consistent improvement. However, companies remain cautious and will likely prioritize efficiencies and cost management as uncertainties loom ahead.

In conclusion, the December 2025 ISM® Manufacturing PMI® Report paints a clear picture of a manufacturing sector under stress, compounded by external factors. The road to recovery may be long and fraught with challenges, but understanding these trends can prepare businesses for what lies ahead.