Is Americas Factory Slowdown Here to Stay-or Is a Turnaround Finally Near?
Source: Kapitales Research
Key highlights:
US manufacturing PMI fell to 47.9, marking the 10th straight month of contraction
Tariffs have lifted costs and reshaped supply chains, hurting many manufacturers
Jobs and investment remain under pressure, with recovery likely to be slow
Manufacturing contracts again as tariffs and costs weigh on activity
The US manufacturing sector remained under pressure in December, extending its contraction streak and raising concerns about the strength of the industrial economy heading into 2026. At the time of writing, the ISM manufacturing PMI was at 47.9, slipping from 48.2 in November and remaining below the 50 mark that signals expansion. This marked the 10th consecutive month that factory activity remained in decline, and the weakest reading in more than a year. New orders continued to fall, while companies reported higher input costs, suggesting that demand remains soft even as operating pressures rise.
Tariffs reshape the industrial landscape
A major factor weighing on the sector has been the impact of US import tariffs, which have lifted costs for manufacturers that rely on overseas raw materials and components. Supporters argue the tariffs are strengthening domestic industry by encouraging local production and boosting government revenue. However, many manufacturers say higher costs are squeezing margins and reducing competitiveness, especially in export-focused industries. Some steel producers and domestic suppliers have benefited from the shift, but those gains have not been enough to offset weakness across the broader factory economy.
Jobs and investment remain fragile
Factory employment declined again in December, extending a long run of job losses in the sector. Businesses remain cautious about hiring as they wait for clearer signs of recovery and more stable demand conditions. Economists also point to structural challenges such as labour shortages, automation and global competition, which make a full return to past manufacturing strength unlikely. Even with supportive policies such as tax incentives and infrastructure investment, many analysts expect any recovery to be gradual rather than dramatic.
What could change the outlook
Markets are now watching upcoming economic data — especially employment, inflation and consumer spending — for clues about whether demand is starting to improve. If growth stabilises and cost pressures ease, manufacturers could regain confidence later this year. Until then, the factory sector appears set to remain a weak spot in the US economy.
Disclaimer for Kapitales Research
The materials provided by Kapitales Research, including articles, news, data, reports, opinions, images, charts, and videos ("Content"), are intended for personal, non-commercial use only. The primary goal of this Content is to educate and inform readers. This Content is not meant to offer financial advice, nor does it include any recommendation or opinion that should be relied upon for making financial decisions. Certain Content on this platform may be sponsored or unsponsored, but it does not serve as a solicitation or endorsement to buy, sell, or hold any securities, nor does it encourage any specific investment activities. Kapitales Research is not authorized to provide investment advice, and we strongly advise users to seek guidance from a qualified financial professional, such as a financial advisor or stockbroker, before making any investment choices. Kapitales Research disclaims all liability for any direct, indirect, incidental, or consequential damages arising from the use of the Content, which is provided without any warranties. The opinions expressed by contributors or guests are their own and do not necessarily reflect the views of Kapitales Research. Media such as images or music used on this platform are either owned by Kapitales Research, sourced through paid subscriptions, or believed to be in the public domain. We have made reasonable efforts to credit sources where appropriate. Kapitales Research does not claim ownership of any third-party media unless explicitly stated otherwise.
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Nextgen Global Services Pty Ltd trading as Kapitales Research (ABN 89 652 632 561) is a Corporate Authorised Representative (CAR No. 1293674) of Enva Australia Pty Ltd (AFSL 424494). The information contained in this website is general information only. Any advice is general advice only. No consideration has been given or will be given to the individual investment objectives, financial situation or needs of any particular person. The decision to invest or trade and the method selected is a personal decision and involves an inherent level of risk, and you must undertake your own investigations and obtain your own advice regarding the suitability of this product for your circumstances. Please be aware that all trading activity is subject to both profit & loss and may not be suitable for you. The past performance of this product is not and should not be taken as an indication of future performance.
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Is Americas Factory Slowdown Here to Stay-or Is a Turnaround Finally Near?
Key highlights:
Manufacturing contracts again as tariffs and costs weigh on activity
The US manufacturing sector remained under pressure in December, extending its contraction streak and raising concerns about the strength of the industrial economy heading into 2026. At the time of writing, the ISM manufacturing PMI was at 47.9, slipping from 48.2 in November and remaining below the 50 mark that signals expansion. This marked the 10th consecutive month that factory activity remained in decline, and the weakest reading in more than a year. New orders continued to fall, while companies reported higher input costs, suggesting that demand remains soft even as operating pressures rise.
Tariffs reshape the industrial landscape
A major factor weighing on the sector has been the impact of US import tariffs, which have lifted costs for manufacturers that rely on overseas raw materials and components. Supporters argue the tariffs are strengthening domestic industry by encouraging local production and boosting government revenue. However, many manufacturers say higher costs are squeezing margins and reducing competitiveness, especially in export-focused industries. Some steel producers and domestic suppliers have benefited from the shift, but those gains have not been enough to offset weakness across the broader factory economy.
Jobs and investment remain fragile
Factory employment declined again in December, extending a long run of job losses in the sector. Businesses remain cautious about hiring as they wait for clearer signs of recovery and more stable demand conditions. Economists also point to structural challenges such as labour shortages, automation and global competition, which make a full return to past manufacturing strength unlikely. Even with supportive policies such as tax incentives and infrastructure investment, many analysts expect any recovery to be gradual rather than dramatic.
What could change the outlook
Markets are now watching upcoming economic data — especially employment, inflation and consumer spending — for clues about whether demand is starting to improve. If growth stabilises and cost pressures ease, manufacturers could regain confidence later this year. Until then, the factory sector appears set to remain a weak spot in the US economy.
Disclaimer for Kapitales Research
The materials provided by Kapitales Research, including articles, news, data, reports, opinions, images, charts, and videos ("Content"), are intended for personal, non-commercial use only. The primary goal of this Content is to educate and inform readers. This Content is not meant to offer financial advice, nor does it include any recommendation or opinion that should be relied upon for making financial decisions. Certain Content on this platform may be sponsored or unsponsored, but it does not serve as a solicitation or endorsement to buy, sell, or hold any securities, nor does it encourage any specific investment activities. Kapitales Research is not authorized to provide investment advice, and we strongly advise users to seek guidance from a qualified financial professional, such as a financial advisor or stockbroker, before making any investment choices. Kapitales Research disclaims all liability for any direct, indirect, incidental, or consequential damages arising from the use of the Content, which is provided without any warranties. The opinions expressed by contributors or guests are their own and do not necessarily reflect the views of Kapitales Research. Media such as images or music used on this platform are either owned by Kapitales Research, sourced through paid subscriptions, or believed to be in the public domain. We have made reasonable efforts to credit sources where appropriate. Kapitales Research does not claim ownership of any third-party media unless explicitly stated otherwise.
Customer Notice:
Nextgen Global Services Pty Ltd trading as Kapitales Research (ABN 89 652 632 561) is a Corporate Authorised Representative (CAR No. 1293674) of Enva Australia Pty Ltd (AFSL 424494). The information contained in this website is general information only. Any advice is general advice only. No consideration has been given or will be given to the individual investment objectives, financial situation or needs of any particular person. The decision to invest or trade and the method selected is a personal decision and involves an inherent level of risk, and you must undertake your own investigations and obtain your own advice regarding the suitability of this product for your circumstances. Please be aware that all trading activity is subject to both profit & loss and may not be suitable for you. The past performance of this product is not and should not be taken as an indication of future performance.
Kapitales Research, Level 13, Suite 1A, 465 Victoria Ave, Chatswood, NSW 2067, Australia | 1800 005 780 | info@kapitales.com.au