U.S. Manufacturing Index Slides to Fresh 2025 Low as December Data Disappoints

Economic data released by the Institute for Supply Management revealed a contraction in U.S. manufacturing activity during December, marking an unexpected reversal from market expectations. The headline manufacturing PMI fell to 47.9, dropping further from November’s 48.2 reading, with any figure below 50 signaling sectoral contraction rather than expansion.

The decline caught analysts off guard, as consensus forecasts had predicted the index would climb to 48.3. This deterioration pushed the U.S. Manufacturing Index to its lowest point so far in 2025, raising fresh concerns about the sector’s near-term momentum.

Subindexes Tell a Story of Weakness

The headline weakness was driven primarily by sharp declines in inventory management and production metrics. The inventories index plummeted to 45.2 from 48.9 the previous month, registering a significant drop. Production activity also retreated, with that subindex sliding to 51.0 in December compared to 51.4 in November—though remaining marginally above the 50 threshold.

Susan Spence, Chair of the ISM Manufacturing Business Survey Committee, attributed the pullback to a reversal of temporary gains: “The recent modest improvements we saw in prior months have given way to renewed contraction, reflecting the underlying fragility in manufacturing conditions and the broader economic uncertainty affecting the sector.”

Labor Demand Softens Amid Mixed Signals

Employment metrics revealed additional softness, with the jobs index rising only modestly to 44.9 in December from 44.0 in November. The new orders gauge inched up marginally to 47.7 from 47.4, suggesting limited demand momentum heading into year-end.

Raw materials pricing, however, remained sticky, with the prices index holding steady at 58.5—unchanged from November and marking the 15th consecutive month of price increases across the supply chain.

Services Sector on Deck

The ISM will release its separate services PMI report on Wednesday. Economists anticipate the services index may cool to 52.3 in December from 52.6 in November, though a reading above 50 would still indicate sector expansion.