U.S. ISM Manufacturing Index (December 2025)

ISM Manufacturing Index in Contraction for Ninth Consecutive Month

• The ISM Manufacturing Index fell to 47.9 in December, down from November's reading of 48.2.
• Only two industries reported growth last month, down from four in November. The share of manufacturing GDP reporting a contraction increased sharply to 85 percent, up from 58 percent in November. 
• Demand conditions remain in contraction but improved somewhat. New orders, new export orders, and the backlog of orders all registered small gains. 
• The production index remained in expansion territory at 51.0, down slightly from November's 51.4.
• The pace of price gains was identical to November's reading, coming in at 58.5. And while the employment index remains in contractionary territory, it increased modestly to 44.9 from 44.0.

Key Implications

• One survey respondent described the recent month as "trough conditions continue" and this characterization is hard to argue with. Respondents in several industries highlighted challenges with lower revenue in 2025, lower orders for 2026, and higher input costs. The slowdown in manufacturing activity is broad-based, covering nearly all industries. The two industries which showed growth in December, electrical equipment, and computer products, affirm that the momentum in growth right now is still coming from the tech sector and AI-related investment. 
• Price pressures have not completely abated, though they have come down considerably. While December's reading of 58.5 is elevated, the index had hovered around 70 in early/mid-2025, and now seems to have durably come down – suggesting the FOMC can remain more focused on the employment side of its dual mandate.

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