KPI – January 2025: State of Manufacturing

• KPI – January 2025: The Brief
• KPI – January 2025: Recent Vehicle Recalls
• KPI – January 2025: State of Business – Automotive Industry
• KPI – January 2025: State of the Economy
• KPI – January 2025: Consumer Trends

Economic activity in the manufacturing sector contracted in December for the ninth consecutive month and the 25th time in the last 26 months, say the nation’s supply executives in the latest Manufacturing ISM Report On Business.

“U.S. manufacturing activity contracted again in December, but at a slower rate compared to November. Demand showed signs of improving, while output stabilized and inputs stayed accommodative,” says Timothy R. Fiore, CPSM, C.P.M., chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee.

According to Fiore, demand improved, production execution met November’s performance (and companies’ plans), de-staffing continued (but should end soon) and price growth was marginal.

“(Approximately) 52% of manufacturing gross domestic product (GDP) contracted in December, down from 66% in November. The share of manufacturing sector GDP registering a composite PMI calculation at or below 45% (a good barometer of overall manufacturing weakness) was 49% in December, a 1 percentage point increase compared to the 48% reported in November. None of the six largest manufacturing industries expanded in December, down from two in November,” Fiore explains.

The Ford F-series was America’s bestselling vehicle in 2024. (Image Source: Ford Motor Company)

Important takeaways, courtesy of the Manufacturing ISM Report On Business:

• Demand analysis includes: the (1) New Orders Index remaining in expansion territory, (2) New Export Orders Index increasing (up 1.3 percentage points and now “unchanged”), (3) Backlog of Orders Index slowing its rate of decline but continuing in contraction territory and (4) Customers’ Inventories Index dropping into “too low” territory.
• Output (measured by the Production and Employment indexes) was positive. Factory output stabilized compared to November, indicating that panelists’ companies are executing to plan. Employment contracted as final head count adjustments were likely taken to prepare for 2025.
• Inputs—defined as supplier deliveries, inventories, prices and imports—generally continued to accommodate future demand growth, with inventories and imports improving marginally (though remaining in contraction), prices increasing and supplier deliveries marginally slowing.

What respondents are saying, according to the Manufacturing ISM Report On Business:

• “Slightly lower due to seasonality and end-of-year destocking.” [Chemical Products]
• “Automotive and powersport volume decreases.” [Transportation Equipment]
• “We are seeing a softening in sales. This is concerning as it’s our peak season.” [Food, Beverage & Tobacco Products]
• “We are constrained by technical labor, despite higher-than-normal backlog.” [Computer & Electronic Products]
• “Significant slowdown in production requirements in the last two months of the year.” [Machinery]
• “Order levels well below forecast projections.” [Fabricated Metal Products]
• “The increase in new orders has our plant at full capacity.” [Electrical Equipment, Appliances & Components]
• “Combo of seasonal factors plus increased demand outlook for 2025.” [Miscellaneous Manufacturing]
• “There is definitely an uptick this month, though not a stable one.” [Primary Metals]
• “The orders have increased slightly due to seasonal restocking.” [Plastics & Rubber Products]