U.S. manufacturing activity continued to contract in December, marking the tenth consecutive month of decline as tariff-related pressures showed little sign of easing heading into 2026.
A survey released Monday by the Institute for Supply Management found that manufacturers in the machinery, computer, and electronic products industries described business conditions as “depressed” and “quieter.” Respondents pointed to the impact of broad U.S. tariffs as a key factor weighing on activity.
Producers in the chemical products sector reported that overall performance in 2025 was weak, though some firms managed to limit cost increases. Even so, they warned that consumer demand has softened, placing much of the blame on higher prices driven by tariffs.
Tariffs have remained a central pillar of U.S. President Donald Trump’s economic strategy since his return to office last year. While the administration has adjusted its approach for certain countries, industries, and companies, analysts say uncertainty around future trade policy continues to cloud the outlook for manufacturers.
That uncertainty has extended into 2026, with growing attention focused on a pending U.S. Supreme Court ruling. The court is expected to decide whether the president can rely on emergency economic powers to impose tariffs. Analysts warn that a ruling against the White House could create additional disruption around the future of existing trade measures.
The ISM manufacturing Purchasing Managers’ Index (PMI) fell to 47.9 in December, down from 48.2 in November and below economists’ expectations of 48.3. Readings below 50 indicate contraction. Manufacturing accounts for roughly 10% of total U.S. economic output.
Forward-looking indicators also remained weak. The new orders index edged up slightly to 47.7 from 47.4 but has now been in contraction for 10 of the past 11 months.
The prices-paid index held steady at 58.5, matching November’s level but coming in below forecasts. Meanwhile, the employment index remained in contraction territory for an eleventh straight month, highlighting ongoing strain in the labor market.
To close out 2025, Federal Reserve policymakers implemented multiple interest rate cuts, prioritizing support for a slowing labor market despite persistent inflation pressures.
Analysts at Vital Knowledge noted that overall demand remains subdued, while upward pressure on prices continues to weigh on manufacturers.
