U.S. Business Growth Slows Sharply as Year Ends on a Weaker Note

16 December 2026

As December drew to a close, the U.S. economy showed signs of losing momentum with business activity expanding at its slowest rate in six months. The preliminary data released mid-December from S&P Global’s flash purchasing managers index, a closely watched snapshot of economic health, painted a picture of an economy still growing but at a distinctly more subdued pace than recent months.

The composite PMI, which combines manufacturing and services activity, dipped to 53.0 in December from 54.2 in November. While a reading above 50 still signals expansion, the drop marked the weakest level since June, raising questions about whether the post-pandemic growth spurt that has defined much of 2025 may be tapering.

The slowdown was broad-based. New orders, a leading indicator of future output, rose at the smallest pace in about 20 months, suggesting that domestic and global demand pressures were easing. Notably, new orders for goods actually contracted for the first time in a year, a concerning signal that manufacturers could face weaker demand in coming months.

Services, which account for roughly two-thirds of the U.S. economy, also cooled. The services PMI fell to 52.9 from 54.1 in November, another six-month low. Firms reported more cautious client spending and slower sales growth as the holiday season wrapped up, traditionally a peak period for consumer activity but one that this year did not deliver the surge expected by many analysts.

Manufacturing activity, though still expanding, also showed signs of fatigue with its gauge dropping to 51.8 from 52.2 in November, the weakest reading since July. A similar measure compiled by other surveys has pointed to more persistent challenges for U.S. factories, where some indices have even shown contraction in recent months.

Economists and business leaders alike have pointed to several factors behind this moderation. Cost pressures remain elevated, with firms reporting higher input prices that they have sometimes passed on to customers even as demand softens. Some of these costs are tied to ongoing tariff policies and shifts in supply chain dynamics that have kept prices and production expenses elevated relative to prior years.

The broader economic backdrop this year has been notably unsettled. A record-long federal government shutdown earlier in the autumn disrupted reporting on key economic data, complicating efforts by policymakers and analysts to chart clear trends. That hiatus in data flows muddied the picture of employment conditions, retail sales and other vital metrics for assessing economic strength.

Despite the softer PMI readings, the economy has not yet tipped into contraction. Fourth-quarter GDP forecasts derived from early indicators like the PMI suggest growth, although at a slower pace than earlier in 2025. Many economists believe the U.S. may close the year with modest expansion rather than a downturn, albeit with clear signs of deceleration.

Business confidence also showed cracks in the December survey results. Companies expressed more cautious expectations for output in the year ahead, reflecting both domestic uncertainties and global economic headwinds. These included concerns about consumer demand softening in key markets and the impact of policy shifts on investment decisions.

Employment growth, while not collapsing, was also reported as weaker in the PMI data. Firms in both services and manufacturing noted softer hiring intentions, with some signaling near-stagnant payroll growth as they assessed demand and cost pressures. This dovetails with other labor market indicators showing a cooling trend, though unemployment rates remain relatively low by historical standards.

To some extent, the moderation in business activity reflects a transition from the rapid rebound seen in the immediate post-pandemic period to a more mature, slower pace of growth. Consumer spending, which has been a stalwart force in the economy, remains resilient in many areas but has shown signs of unevenness, with lower-income households particularly squeezed by higher prices in categories like food and energy.

Policy makers, including the Federal Reserve, are closely watching these trends as they weigh the risks of further interest rate adjustments. Persistent cost pressures could support arguments against rapid easing, even as slowing activity suggests that monetary policy should remain attentive to growth risks. The Fed’s balance is delicate: too aggressive a tightening threatens to choke off recovery, while too rapid a loosening could reignite inflation.

Internationally, similar patterns have appeared. Other major economies have reported slower activity as well, albeit with different drivers and dynamics reflected in their own PMI and economic data, pointing to a global backdrop of moderating growth as 2025 draws to a close.

In practical terms, the softer readings in December may translate into a slower start to economic activity in early 2026. Companies tend to make hiring and investment decisions based on forward-looking indicators like new orders and business sentiment, both of which eased in the final month of the year. If demand remains tepid, firms could delay capital expenditure or limit expansion plans, potentially dampening broader economic momentum.

Despite these headwinds, many economists believe the U.S. economy remains fundamentally resilient. Consumer demand has not collapsed, and certain sectors, like technology and services that cater to remote work and digital transformation, continue to show pockets of strength. Yet the overall narrative for late 2025 is one of cooling after a year marked by volatility, policy shifts and significant economic surprises.

As the U.S. moves into 2026, business leaders and policymakers will be closely monitoring whether the momentum captured in the PMI surveys translates into sustained economic trends or whether further adjustments, both in policy and corporate strategy, are needed to navigate a slower growth environment.