In a clear sign of persistent economic headwinds, manufacturing activity in the United States slumped to its lowest point of the year in December 2023. This marks the tenth straight month the sector has remained in contraction territory, according to the latest data from the Institute for Supply Management (ISM).
Key Indicators Paint a Gloomy Picture
The closely watched ISM Manufacturing Purchasing Managers' Index (PMI) dipped further to 47.9 in December from 48.2 in November. A reading below 50 indicates contraction. This latest figure represents the weakest performance for the sector throughout the entire year. The production sub-index also fell, dropping below its November level.
While the employment gauge showed a slight improvement, rising by 0.9 percentage points, it still remained below the crucial 50-mark, meaning job creation in manufacturing continues to shrink. The overall industry sentiment remains deeply pessimistic, with the report revealing that only two out of seventeen manufacturing sectors reported growth, while fifteen experienced contraction.
Sector-Specific Struggles and a Flicker of Hope
Comments from industry executives compiled in the ISM report highlight widespread challenges. A firm in the computer and electronic products sector pointed to ongoing price pressures, stating that while tariff discussions have quieted, product costs remain elevated. "We've had to raise prices while seeing our margins shrink," the company noted.
The transportation equipment sector presented an especially grim outlook. One company, cited in the report, bluntly said "things are not improving," pointing to low truck rental usage as a key indicator. The company offered a bleak forecast, believing "the first half of 2026 will be another bust," and is now pinning hopes on a potential recovery in the second half of that year, even as the North American truck fleet continues to age.
What Does the Future Hold?
Amid the concerning data, ISM survey chair Susan Spence identified one potential positive signal. She noted that customers' inventory levels were reported as "too low," which is traditionally seen as a precursor to future increases in manufacturing orders as stocks need replenishing.
However, Spence injected a strong note of caution, emphasizing that "several consecutive months of gains in these indicators are necessary for a longer-term recovery." This suggests that a single month of improved data will not be enough to declare the sector's downturn over. The prolonged contraction underscores broader global economic uncertainties and their impact on industrial demand and supply chains.
