- US manufacturing activity dropped in December, hitting its lowest point for the year with a PMI of 47.9%.
- Tariff uncertainty and weak demand remain the sector’s biggest challenges into 2026.
- Computer and electronics manufacturing was the only major sector to see notable growth in 2025.
- Geopolitical risks, such as the US military operation in Venezuela, add volatility to outlooks.
Manufacturing Activity Hits 2025 Low
US manufacturing sector activity finished 2025 on a weak note, reports Manufacturing Dive. The Institute for Supply Management’s December Purchasing Managers Index registered 47.9%, marking the lowest point of the year and indicating continued contraction in the manufacturing sector. Ongoing tariff concerns, combined with weak international and domestic demand, drove the downturn.
Tariffs, Demand, and Geopolitical Risks
Tariffs remain the top challenge for US manufacturers. ISM survey respondents report softer export orders due to policy uncertainty. New orders, backlog, and export indexes all stayed in contraction, though with slight improvement. Adding to the uncertainty is the US military operation in Venezuela, which could affect oil prices and the broader manufacturing sector. Major players like Chevron and ConocoPhillips are watching the situation closely. Future investment decisions remain undecided.
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Sector Performance Diverges
Among tracked manufacturing segments, computer and electronics products stood out in 2025 thanks to ongoing demand for data centers and AI infrastructure. In contrast, traditional industrial groups like transportation equipment and chemical products saw persistent contraction. The petroleum and coal products sector expanded for most of 2025 but declined late in the year as global supply chains and pricing grew more volatile.
Employment and Inventory Trends
Manufacturing employment continued to contract, albeit at a slower pace, as firms focused on headcount management rather than hiring. Supplier deliveries decelerated in December and customer inventories are considered ‘too low’, signaling some prospects for future production upticks should demand return. However, with production outpacing new orders, current manufacturing levels may be unsustainable, increasing sector risk into 2026. That said, major tech players are continuing to invest heavily in domestic manufacturing, signaling long-term confidence despite current volatility.
