2025 was a challenging year for America’s factories. The year began with January’s PMI reading of 50.9, the first expansion after 26 months of contraction. Optimism was short-lived; by February the index slipped to 50.3, and by March it dipped below the neutral 50 mark. U.S. manufacturers had to navigate an unpredictable trade environment after the administration’s sweeping tariffs on imported goods, which sharply increased raw-material costs and complicated supply chains.
Demand weakened across much of the year, and employment remained in contraction for most months. The picture brightened in select sectors such as computer and electronic products, which benefited from strategic investments in domestic chip fabrication. Below is a month-by-month view of 2025’s manufacturing indicators.
A year in data: monthly PMI values and key indices
The Institute for Supply Management’s Manufacturing PMI® shows whether factory activity is expanding (>50) or contracting (<50). January and February registered modest growth before the index fell into contraction for the remainder of 2025. The line chart below illustrates the trend.
| Month | PMI | New Orders | Production | Prices | Employ. | Notes |
| Jan | 50.9 | 55.1 | 52.5 | 54.9 | 50.3 | First expansion after 26-month contraction; 43% of manufacturing GDP contracted. |
| Feb | 50.3 | 48.6 | 50.7 | 62.4 | 47.6 | PMI slipped but remained above 50; tariffs began to push prices up 20%. |
| Mar | 49.0 | 45.2 | 48.3 | 69.4 | 44.7 | Demand and production weakened; 46% of manufacturing GDP contracted. |
| Apr | 48.7 | 47.2 | 44.0 | 69.8 | 46.5 | Continued contraction; production slumped sharply. |
| May | 48.5 | 47.6 | 45.4 | 69.4 | 46.8 | Imports index plunged; 57% of manufacturing GDP contracted. |
| Jun | 49.0 | 46.4 | 50.3 | 69.7 | 45.0 | Production temporarily returned to growth; high prices persisted. |
| Jul | 48.0 | 47.1 | 51.4 | 64.8 | 43.4 | 79% of manufacturing GDP contracted; 31% strongly contracted. |
| Aug | 48.7 | 51.4 | 47.8 | 63.7 | 43.8 | New orders briefly returned to growth. |
| Sep | 49.1 | 48.9 | 51.0 | 61.9 | 45.3 | Production expanded; 67% of manufacturing GDP contracted. |
| Oct | 48.7 | 49.4 | 48.2 | 58.0 | 46.0 | 58% of manufacturing GDP contracted; 41% in strong contraction. |
| Nov | 48.2 | 47.4 | 51.4 | 58.5 | 44.0 | Production jumped into expansion; employment deteriorated. |
| Dec | 47.9 | 47.7 | 51.0 | 58.5 | 44.9 | Lowest PMI since Oct 2024. |
Key takeaways
Tariff-induced price shocks. After tariffs were announced in early 2025, the Prices Index surged, reaching 69.8 in April and remaining in the high 60s for much of the year. Companies reported that tariffs drove up raw-material costs and caused supply-chain delays. Suppliers increased prices in anticipation of the mid-March tariff implementation.
Demand weakness. The New Orders Index fell into contraction in March and stayed below 50 for most of the year. Respondents cited order cancellations, tariff uncertainty, and high prices as reasons for caution. Even when production briefly expanded in June and July, the gap between output and new orders widened, suggesting unsustainable production.
Employment contraction. Employment indices stayed below 50 in every month after January, reflecting layoffs and hiring freezes. By November, the Employment Index had dropped to 44.0.
High share of GDP in contraction. More than half of manufacturing GDP was in contraction during most months; the share in strong contraction (PMI≤45) climbed from 2% in February to 41% by October.
What the data means
The data above show a manufacturing sector stuck in contraction despite occasional glimmers of growth. January and February’s expansions were driven largely by pre-tariff ordering as companies rushed to stock up ahead of cost increases. Once tariffs took effect in mid-March, price pressure surged, and new orders plunged. March’s PMI fell back into contraction, and the price index jumped to 69.4, signaling rapid cost inflation.
Mid-year saw a modest rebound. Production briefly returned to growth in June and July, and August brought a rare uptick in new orders, suggesting that some customers had adjusted to higher prices. However, the recovery was shallow; the supply executives surveyed by ISM repeatedly warned that tariff uncertainty and high costs were suppressing demand and forcing companies to manage headcount rather than hire. By November and December, even production gains were fragile, and the year ended with the PMI at 47.9, the lowest reading since October 2024.
New factory and manufacturing announcements
Despite weak orders, companies continued to announce large manufacturing investments in 2025, spurred by tariff incentives to reshore production and government subsidies. These announcements highlight long-term optimism about U.S. manufacturing competitiveness. Significant projects include:
GE Appliances’ $3 billion expansion: Kentucky, Alabama, Georgia, Tennessee, and South Carolina
GE Appliances announced a $3 billion plan to expand U.S. manufacturing and modernize facilities. The initiative will create more than 1,000 new jobs across multiple southern states and is the company’s second-largest investment ever.
LG Electronics’ Clarksville expansion: Clarksville, Tennessee
LG Electronics committed $100 million to expand its appliance assembly plant in Clarksville. The project includes a 560,000-square-foot warehouse and a new refrigerator assembly line, doubling the site’s footprint.
General Motors and Stellantis turbo-charge auto investment
General Motors announced a $4 billion investment to upgrade its assembly plants in Michigan, Kansas, and Tennessee to increase production of gas-powered and electric vehicles. It also pledged $888 million to retool its Buffalo, NY, facility for next-generation V-8 engines.
Stellantis unveiled a $13 billion U.S. expansion, the largest in its 100-year history, aimed at boosting domestic production by 50%, launching five new vehicles, refreshing 19 products, and creating over 5,000 jobs in Illinois, Ohio, Michigan, and Indiana.
Toyota and Hyundai diversify powertrains
Toyota will invest $912 million to expand advanced powertrain production and hybrid-electric vehicle assembly across West Virginia, Kentucky, Tennessee, and Missouri, enhancing machining, casting, and electric-drive component manufacturing. Hyundai Motor Group announced a $21 billion U.S. investment between 2025 and 2028 to expand manufacturing and energy infrastructure as it shifts toward electric vehicles.
Boeing and Airbus fuel the aerospace boom
In North Charleston, South Carolina, Boeing began a $1 billion expansion of its 787 Dreamliner plant that will support 1,000 new jobs and increase production to ten aircraft per month. Airbus opened a new assembly line for the A320 jetliner at its Mobile, Alabama factory, doubling U.S. production capacity and adding 1,000 jobs. Start-ups joined the fray: Otto Aviation announced a $430 million factory in Jacksonville, Florida, to build its Phantom 3500 business jet, creating nearly 400 jobs.
Medical-device and electronics investments
Pratt & Whitney will spend $285 million to expand its turbine-airfoil plant in Asheville, North Carolina, adding 325 jobs. German medical-device maker B. Braun plans to invest $20 million to modernize its Hanover Township, Pennsylvania facility, creating at least 200 full-time jobs. Philips announced more than $150 million in manufacturing and R&D expansions in Pennsylvania and Minnesota, strengthening domestic production of transducers, ultrasound systems, and image-guided therapy equipment.
In the electronics sector, Apple pledged over $500 billion in U.S. investment over four years, including a new 250,000-square-foot server factory in Houston and doubling its U.S. Advanced Manufacturing Fund. IBM announced a $150 billion commitment to accelerate research and manufacturing, with more than $30 billion devoted to R&D. Rockwell Automation will build a greenfield manufacturing campus in Wisconsin as part of its $2 billion investment plan.
Future outlook
Looking ahead to 2026, U.S. manufacturing faces a mixed outlook. Tariffs remain the biggest wild card. If the new administration maintains or expands duties on imported components, elevated costs could continue to suppress orders and keep the PMI in contraction. Conversely, any relaxation of trade barriers or clearer tariff guidance could unleash pent-up demand. Supply-chain reconfiguration will take time, but the substantial investment commitments highlighted above suggest that manufacturers are positioning themselves for a long-term domestic renaissance, particularly in semiconductors, electric vehicles, aerospace, and advanced medical devices.
Meanwhile, the share of manufacturing GDP in strong contraction reached 41% by October before easing slightly to 39% in November, indicating that the sector will need sustained demand growth to return to broad expansion. Economists predict that inflation may moderate as companies adapt to tariffs, while government incentives tied to the CHIPS and Science Act and the Inflation Reduction Act will continue to encourage reshoring. If these trends converge, the sector could gradually transition from contraction back to expansion later in 2026.
Bottom line: 2025 demonstrated the resilience of U.S. manufacturers in the face of tariff-driven headwinds. Despite contracting PMI readings for most of the year, companies committed hundreds of billions of dollars to build and expand domestic factories. As these projects come online, they could lay the groundwork for a more competitive and self-reliant manufacturing base in the years ahead.
