President Trump would be pleased to know that manufacturers ended 2024 on a positive note, as both demand and production showed improvement in December, according to the latest data from the Institute for Supply Management (ISM). The Purchasing Managers’ Index (PMI) rose to 49.3% last month, marking a 0.9 percentage point increase from November’s reading. This uptick signals an encouraging trend for the manufacturing sector, with December’s performance suggesting that recovery is gaining momentum.
New orders, a key component of the PMI, surged past the 50.0 threshold for economic growth, reaching 52.5%. Meanwhile, production levels also showed positive movement, climbing to 50.3%. “2024 has been quite the year; it started out dynamic and is ending just as dynamic,” said Timothy Fiore, chair of the ISM’s Manufacturing Business Survey Committee. “We’ve got new growth beginning in November and December, and we’re starting to see where this will lead.”
Several industries reported growth in December, highlighting the overall recovery of the sector. These industries included primary metals, electrical equipment, appliances and components, wood products, furniture and related products, paper products, miscellaneous manufacturing, and plastics and rubber products. This broad-based growth underlines the resilience of manufacturers despite challenges in the global economy.
However, the potential for new tariff hikes looms large for many manufacturers. Fiore noted that 40% of survey respondents expressed concerns over potential trade policy changes. As a result, many manufacturers are considering dual sourcing strategies and identifying suppliers that would be unaffected by tariff increases. Despite these concerns, Fiore does not anticipate any significant impact on the industry until the second quarter of 2025.
While ISM’s data pointed to a positive December, S&P Global’s index for the same month showed a slight decline. The PMI dropped to 49.4%, down from November’s 49.7%. This decrease was driven primarily by a fall in demand and production. Nevertheless, industry optimism remains high, with many firms looking ahead to the new year with expectations of increased business activity under a new administration. “Firms are hopeful that the new administration will loosen regulations, reduce tax burdens, and support U.S.-made goods through tariffs,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.
Inflationary pressures remained a concern at the close of the year. S&P reported increases in input costs, supplier charges, and raw material prices, with aluminum, basic chemicals, copper, and natural gas seeing higher costs. These price hikes are a key challenge for manufacturers as they prepare for the year ahead.
On the employment front, Fiore anticipates improvements as manufacturers finalize their revenue plans for the first half of 2025. ISM’s employment reading fell to 45.3% in December, partly due to end-of-year layoffs. However, if demand continues to grow in the new year, Fiore expects supplier deliveries to slow, signaling a positive strain on the supply chain as orders rise.
Fiore expressed optimism, stating that the rebound in demand and production will position the industry for growth in 2025. “If we see demand aggregating in the supply base, we will enter the next growth cycle,” he said. This growth would be a welcome development after a rocky 2024, offering hope for a stronger economic recovery moving forward.
