Decreasing Activity and Confidence in US Manufacturing
The manufacturing activity in the United States has contracted for the tenth consecutive month in December, according to a survey released on January 5. This decline indicates persistent low confidence due to tariffs and uncertainty surrounding trade policies.
ISM Manufacturing Index Falls to Lowest Point of 2025
The Institute for Supply Management (ISM) manufacturing index dropped to 47.9 points in December from 48.2 points in November, marking the lowest point of 2025 despite modest improvements in employment and other categories.
Production and Employment Trends
The production reading decreased compared to November levels, while employment continued to contract despite a 0.9 percentage point improvement from November.
Inventory Levels and Future Production
Survey participants described customers’ inventories as “too low,” which usually signals positive future production, according to Susan Spence, president of the ISM survey.
“However, to achieve long-term recovery, these indicators need to show gains for several consecutive months,” Spence added in a statement.
Sector-wide Comments and Industry Performance
The ISM press release included a series of comments, mostly pessimistic, from participants across the manufacturing sector. Only two industries reported growth, while 15 experienced contraction.
“The tariff situation is more settled, but prices for all products remain high,” stated a computer and electronics products company.
Key Questions and Answers
- Q: What does the recent decline in the ISM manufacturing index indicate?
A: The decline in the ISM manufacturing index to 47.9 points in December suggests persistent low confidence in the US manufacturing sector, primarily due to tariffs and uncertainty surrounding trade policies.
- Q: How have production and employment trends been affected?
A: Production readings have decreased compared to November levels, while employment continues to contract despite a slight improvement from November.
- Q: What do low inventory levels suggest about future production?
A: Low customer inventories, described as “too low” by survey participants, usually signal positive future production. However, long-term recovery in the manufacturing sector requires several consecutive months of gains in these indicators.
- Q: How are manufacturers perceiving the current tariff situation and product prices?
A: Although the tariff situation has become more settled, manufacturers report that product prices remain high. For instance, a computer and electronics products company mentioned that prices for all products are still elevated.
