Source: Supply Chain Dive
Date: 6th January 2026 

December PMI hits the lowest level of the year, highlighting ongoing pressure on production, trade flows, and supply chain confidence heading into 2026.

U.S. manufacturing activity fell to its weakest point of 2025 in December, reflecting sustained pressure from tariff uncertainty and soft demand. The latest Purchasing Managers’ Index released by the industry association registered below the expansion threshold, signalling continued contraction across the sector. While certain demand indicators showed marginal improvement, overall conditions remain fragile and uneven.

New orders, backlogs, and export demand showed limited recovery but stayed in contraction territory, suggesting that underlying demand has yet to stabilise. Production remained in expansion for a second consecutive month, though industry leaders cautioned that output growth may be temporary and not supported by consistent order inflows. This disconnect raises concerns about the sustainability of current production levels.

Tariffs continue to be cited as the primary challenge for manufacturers, with international orders particularly affected by ongoing trade policy uncertainty. Export-focused businesses reported more negative than positive sentiment, while companies largely shifted from hiring to headcount management. Slower supplier deliveries and lean customer inventories point to potential short-term replenishment needs, but also reflect broader supply chain strain.

Performance varied by sector. Technology-related manufacturing showed relative resilience due to continued investment in data-driven infrastructure, while transportation equipment, chemicals, and other industrial segments contracted through most of the year. Energy-related sectors weakened late in the year, adding another layer of uncertainty as geopolitical developments raise concerns over future commodity price volatility.

Looking ahead, manufacturing faces a challenging start to 2026. Despite steady growth in the wider economy, the sector remains under pressure from weak demand, rising costs, and unresolved trade tensions. Unless order volumes improve materially, current production levels may prove difficult to sustain, increasing the risk of further supply chain disruptions.

Shippers may face more volatile freight demand as manufacturers balance production against uncertain order pipelines, leading to uneven shipment volumes and cautious capacity planning.

Importers could see continued pressure on inbound flows for industrial components, with tariffs and weak demand influencing sourcing decisions and inventory strategies.

Exporters are likely to experience softer international demand, particularly in tariff-sensitive markets, requiring greater flexibility in routing, pricing, and market diversification strategies.