American Manufacturing PMI Shows Continued Weakness as 2025 Begins

The U.S. manufacturing sector entered the new year struggling with persistent headwinds, as reflected in the latest PMI readings. Factory activity deteriorated further in December, with the ISM Manufacturing PMI sliding to 47.9—marking the weakest performance since October 2024. This continued decline underscores the challenges facing American manufacturers amid ongoing trade policy uncertainties.

Factory Activity Declines with Tariff Pressures

Production output fell further, dropping 0.4 points to 51.0, signaling moderating momentum in the sector. The pressure from tariff-related costs appears to be weighing on manufacturing operations, as companies grapple with elevated input expenses and reduced pricing power. Survey respondents repeatedly cited the past year as disappointing, reflecting a cautious business environment driven by policy uncertainty and weakening domestic demand.

Multiple Indicators Point to Soft Demand

The weakness extends across demand metrics, with new orders remaining in contraction territory for the fourth consecutive month—staying below the 50 threshold. This sustained period of subdued demand suggests manufacturers are facing a challenging pricing environment with limited ability to pass costs to customers. The persistent weakness in order books raises concerns about production sustainability if conditions fail to improve.

Employment and Cost Challenges Mount

The employment index has now signaled contraction for eleven consecutive months, revealing ongoing hiring freezes across the manufacturing sector. Meanwhile, the prices paid index remained elevated at 58.5, indicating that manufacturers continue to face significant cost pressures despite softening demand. This disparity—where costs remain sticky while sales momentum weakens—leaves companies caught in a profitability squeeze as they navigate a difficult economic backdrop.

The convergence of declining activity, weak demand, persistent job losses, and elevated costs paints a challenging picture for American manufacturing as the year progresses. The PMI data underscores how trade policy and demand uncertainty continue to restrain the sector’s growth prospects.