Economic activity in the manufacturing sector contracted in December for the 10th consecutive month, following a two-month expansion preceded by 26 straight months of contraction, according to the latest ISM Manufacturing PMI Report.
The report was issued by Susan Spence, chair of the Institute for Supply Management (ISM) manufacturing business survey committee.
“The Manufacturing PMI registered 47.9% in December, a 0.3-percentage point decrease compared to the reading of 48.2% in November and the lowest reading of 2025. The overall economy continued in expansion for the 68th month after one month of contraction in April 2020. (A Manufacturing PMI above 42.3%, over a period of time, generally indicates an expansion of the overall economy.) The New Orders Index contracted for a fourth straight month in December following one month of growth; the figure of 47.7% is 0.3 percentage point higher than the 47.4% recorded in November. The December reading of the Production Index (51%) is 0.4 percentage point lower than November’s figure of 51.4%. The Prices Index remained in expansion (or ‘increasing’ territory), registering 58.5%, the same as November’s reading. The Backlog of Orders Index registered 45.8%, up 1.8 percentage points compared to the 44% recorded in November. The Employment Index registered 44.9%, up 0.9 percentage point from November’s figure of 44%,” Spence said. “The Supplier Deliveries Index indicated slower delivery performance after one month in ‘faster’ territory. The reading of 50.8% is up 1.5 percentage points from the 49.3% recorded in November. (Supplier Deliveries is the only ISM PMI Reports index that is inversed; a reading of above 50% indicates slower deliveries, which is typical as the economy improves and customer demand increases.) The Inventories Index registered 45.2%, down 3.7 percentage points compared to November’s reading of 48.9%.”
Spence added, “The New Export Orders Index reading of 46.8% is 0.6 percentage point higher than the reading of 46.2% registered in November. The Imports Index registered 44.6%, 4.3 percentage points lower than November’s reading of 48.9%. 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. 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.”
Spence continued, “Although the demand indicators are still in contraction, improvement in three indexes (New Orders, Backlog of Orders and New Export Orders) and the Customers’ Inventories Index remaining in ‘too low’ territory (and at an accelerated rate) are positive signs for December, but several consecutive months of gains in these indicators are necessary for a longer-term recovery. A ‘too low’ status for the Customers’ Inventories Index is usually considered positive for future production. Regarding output, the Production Index is still in expansion but slipped 0.4 percentage point, likely due to last month’s drop in the New Orders and Backlog of Orders indexes. The Employment Index contracted at a slower pace, with 63% of panelists indicating that managing head counts is still the norm at their companies, as opposed to hiring.”
Spence concluded, “Finally, inputs (defined as supplier deliveries, inventories, prices and imports) were mixed, with the Supplier Deliveries Index indicating slower deliveries, the Inventories and Imports indexes contracting strongly, and the Prices Index with the same reading as in November. Looking at the manufacturing economy, 85% of the sector’s gross domestic product (GDP) contracted in December, compared to 58% in November, and the percentage of manufacturing GDP in strong contraction (defined as a composite PMI of 45% or lower) increased to 43%, compared to 39% in November. The share of sector GDP with a PMI at or below 45% is a good metric to gauge overall manufacturing weakness. Of the six largest manufacturing industries, only Computer & Electronic Products expanded in December.”
The two manufacturing industries reporting growth in December are:
- Electrical equipment, appliances and components
- Computer and electronic products
The 15 industries reporting contraction in December — in the following order — are:
- 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
- Transportation equipment
