WASHINGTON, Jan 5, 2026, 14:30 EST
- ISM’s manufacturing PMI fell to 47.9 in December, marking a 10th straight month of contraction.
- New orders stayed in decline and input-cost pressures remained elevated, with the prices index holding at 58.5.
- Tariff policy and a looming Supreme Court test are adding uncertainty to any 2026 factory rebound.
U.S. manufacturing activity sank to a 14-month low in December, with a closely watched ISM survey showing a 10th straight month of contraction as tariff-driven costs stayed high.
The Institute for Supply Management’s Purchasing Managers’ Index (PMI) — a diffusion index where readings below 50 signal contraction — slipped to 47.9 from 48.2 in November, ISM said. Manufacturing is a smaller slice of the economy than services, but it is highly sensitive to trade rules and shifts in demand.
The report lands as businesses and investors assess how President Donald Trump’s sweeping import tariffs are feeding through to prices and orders. Economists have warned that higher goods costs can squeeze demand even as inflation remains above the Federal Reserve’s 2% target.
New orders, a forward-looking gauge of demand, held in contraction at 47.7, while the production index stayed in expansion at 51.0, ISM said. The inventories index dropped to 45.2, signaling manufacturers were pulling down stockpiles, and the employment index remained in contraction at 44.9.
Susan Spence, who chairs ISM’s manufacturing survey committee, said 85% of manufacturing gross domestic product contracted in December, up sharply from November. She said only electrical equipment and computer and electronic products reported growth, a sign the weakness remained broad outside pockets tied to technology demand.
Input costs showed little relief. ISM’s prices-paid index, which tracks how many firms report paying higher prices for materials, was unchanged at 58.5, ISM said, keeping the measure firmly in “increasing” territory.
Hiring stayed weak. ISM said factory employment fell for an 11th straight month, and companies’ comments skewed heavily toward cutting headcount rather than adding workers.
Trade policy remains a central variable. Yale Budget Lab estimated Trump’s protectionist measures lifted the average tariff rate on imported goods to nearly 17%, up from less than 3% a year earlier, according to reporting on the ISM release.
“We remain cautious on the extent of recovery in traditional cap-ex categories this year,” said Shannon Grein, an economist at Wells Fargo, using shorthand for capital spending. Economists polled by Reuters had expected the PMI to hold near 48.4. Reuters
