A majority of economists expect the U.S. to remain a world productivity leader, in large part due to the artificial intelligence boom, according to a new Financial Times survey. Nearly half of those believe the U.S. will boost its productivity edge, while another 31% say the country will maintain its current lead. U.S. labor productivity jumped 10% between 2019 and 2024, thanks to technological advancements and the redistribution of workers during the pandemic. The nation is expected to notch the strongest growth in the G7 this year.
US Manufacturing Weakness Deepens as ISM PMI Falls to One-Year Low
The Institute for Supply Management released its December 2025 Manufacturing PMI this morning, offering one of the clearest monthly reads on conditions inside the U.S. factory sector. The survey reflects responses from purchasing and supply executives and tracks changes in demand, output, labor, inventories, and pricing.
The headline Manufacturing PMI registered 47.9 in December, down from 48.2 in November and the lowest reading of the year. A reading below 50 signals contraction. ISM noted that this marks the 10th consecutive month of contraction in manufacturing, even as the broader U.S. economy remained in expansion.
The report also highlights an important threshold that is easy to overlook. ISM notes that a Manufacturing PMI above 42.3 over time is generally consistent with overall economic expansion. At 47.9, the signal is not that the economy is rolling over, but that manufacturing continues to lag behind other areas of growth.
Within the details, the demand side remains the primary constraint. The New Orders Index came in at 47.7, contracting for a fourth consecutive month despite a modest improvement from November. Order backlogs also remained in contraction at 45.8. Imports fell sharply to 44.6, pointing to a pullback in inbound demand and procurement activity.
The sharp drawdown in inventories suggests many firms are relying on existing stockpiles rather than rebuilding production pipelines as demand visibility remains limited.
At the same time, output has been more resilient than demand. The Production Index remained in expansion at 51.0, though it eased from the prior month. Employment remained in contraction at 44.9, reinforcing that headcount management remains the norm rather than active hiring.
The inflation signal remains stubborn. The Prices Index held at 58.5 for a second consecutive month, indicating that input costs continue to rise even as activity slows.
One of the most telling lines in the release speaks to breadth. ISM reported that 85 percent of manufacturing sector GDP contracted in December, up sharply from 58 percent in November, and only one of the six largest manufacturing industries expanded. When contraction becomes this widespread, it tends to show up next in cautious capital spending and delayed investment decisions rather than immediate job losses.
Taken together, today’s ISM report suggests that as the economy moves into 2026, the risk is less about a sudden downturn and more about prolonged caution. Manufacturing remains a drag, cost pressures are easing only gradually, and improvement is likely to be slow rather than rapid.