US Factory Activity Shrinks the Most in Four Months Amid Weak Orders, Tariff Uncertainty

U.S. manufacturing activity contracted in November by the most in four months, signaling that producers are struggling to overcome an extended period of malaise, Bloomberg reported Monday (Dec. 1).

Based on a new survey, the Institute for Supply Management’s (ISM’s) manufacturing index eased 0.5 point, settling at 48.2. With a measure below 50 indicating contraction, the index has now remained in decline for nine consecutive months.

The survey data suggested the nation’s manufacturing base remains hampered by ongoing trade policy uncertainty and elevated production costs. Customer demand has been “largely uninspiring,” according to the report, contributing to orders contracting in November at the fastest pace seen since July, while backlogs shrank by the most in seven months.

Susan Spence, chair of the ISM Manufacturing Business Survey Committee, noted that uncertainty regarding tariffs is driving the pullback as customers delay orders pending greater clarity on the cost of goods. Spence stated that without improved certainty, “We do not see anything on the horizon that’s going to turn the ship.”

The slowdown in customer demand helped explain a sharper drop in factory staffing levels during the month. Roughly 25% of respondents reported decreased employment, representing the largest share since mid-2020. Compounding the pressure, the ISM index of prices paid for materials picked up for the first time in five months and is approximately eight points higher than a year ago.

Eleven manufacturing industries contracted in November, led by apparel and wood products. Only four industries, including computer and electronic products, reported growth — the fewest in a year. Some respondents indicated that they are instituting permanent changes, such as staff reductions and developing additional offshore manufacturing, due to the tariff environment. The unstable market has also caused highly volatile pricing and reduced supplier options for some raw materials.

In October, PYMNTS reported global businesses warning of more than $35 billion in costs from U.S. tariffs even before Q3 2025 earnings. Furthermore, PYMNTS’ analysis highlighted that manufacturers are normalizing tariffs into “business-as-usual” variables, requiring embedded costs in planning and supply chain design. This finding directly explains why manufacturers are leaning into staff reductions and offshore manufacturing to stabilize supply chains.