MNI INTERVIEW: Manufacturing To Continue To Soften - ISM Chief

U.S. manufacturing activity will remain under pressure in early 2026 as the ISM index recorded a third consecutive decline in December and has spent the prior ten months in contraction, Institute for Supply Management manufacturing chair Susan Spence told MNI.

"It just feels like we're kind of mired in more of the same," said Spence, who is expecting some further softening in the overall PMI in coming months. 

"Now we have the twist of the uncertainty with the Venezuela issue," she said. "I don't think more uncertainty is going to make anything better." (See: MNI INTERVIEW: Fed In Easing Territory After Rate Cuts - Tracy) 

The ISM manufacturing index declined in December, against consensus expectations for a small increase. The ISM PMI fell to 47.9 percent in December, a 0.3-percentage point decrease compared to the 48.2% in November and the lowest reading of 2025. 

YEAR-END BLIP

The composition of the report was mixed, with increases in the new orders and employment components but a decrease in the production component. New orders edged up to 47.7 from 47.4, employment increased 0.9 to 44.9, while production dipped to 51.0 from 51.4. 

Spence downplayed positive signs in demand. "All three demand indicators did improve a bit, but they're still in contraction," she said. "Several consecutive months of gains in these indicators are necessary for a longer-term recovery." 

Additionally, those increases are likely a blip that will fade away and are not certain to translate to an increase in the production subindex, she said, adding that a boost from end-of-year spending will fade away next month. 

"A fair amount of our panelists said it's end of the year ordering. Maybe it's the inventory for the customers being too low."

The prices index registered 58.5%, unchanged from November. 

LOW MORALE

“Looking at the manufacturing economy, 85% of the sector’s gross domestic product contracted in December, compared to 58% in November, and the percentage of manufacturing GDP in strong contraction increased to 43%, compared to 39% in November," Spence said. "It really does worry me."

"Of the six largest manufacturing industries, only computer and electronic products expanded in December,” she said. 

ISM panelists noted morale was low across manufacturing in general. "For every positive comment, we have 3.6 that are negative," Spence said.  "For hiring, for everyone that is hiring, there's three that aren't. There's a ratio of positive to negative sentiment on production and that's at least down to pretty even."