General

The NFIB Small Business Optimism Index inched up 0.5 points to 99.5 in December, remaining slightly above the 52-year average of 98. December’s increase was due primarily to the rise in those expecting better business conditions. Of the 10 components included in the index, two increased, three decreased and five stayed the same. Meanwhile, the Uncertainty Index dropped 7 points to 84, the lowest reading since June 2024 but still well above the 51-year average (68) and slightly above the average since 2016 (80).

Taxes were cited as the top concern for small business owners, with 20% reporting them as the most important problem, up 6 points from November. The share of business owners reporting labor quality as the top problem fell 2 points from November to 19%, with 33% struggling to fill open jobs and 53% reporting hiring or trying to hire in December. Meanwhile, inflation fell to third in the list of concerns, with 12% reporting it as a top problem, down 3 points from November, with a net 30% raising prices.

A net 31% of small business owners reported raising compensation, up 5 points in December after remaining unchanged in November. Meanwhile, 24% of business owners plan to raise compensation in the next three months, unchanged from November. Pressure on profitability weakened in December, with positive profit trends rising 3 points from November to a net negative 20%. Among owners reporting lower profits, 41% blamed weaker sales, 13% cited increased material costs, 12% mentioned usual seasonal changes, 9% reported price changes from their products or services and 7% noted labor costs. Meanwhile, 5% reported their last loan was harder to get than previous attempts, up 1 point from November, and a net negative 3% of owners cited paying a higher interest rate on their most recent loan, down 5 points from the prior month.

The outlook for general business conditions rose 9 points to 24%, the first increase since July. Despite the improvement in December, expectations for better business conditions have fallen 23 points since the start of 2025. At the same time, 13% reported that it is a good time to expand their business, unchanged for the second consecutive month and a rather weak reading compared to times of economic expansion. Overall, despite consumer sentiment remaining low, small business owners anticipate economic conditions to remain broadly favorable in 2026, with cost pressures moderating and other challenges easing.

Manufacturing activity in New York state increased in January, with the headline business conditions index climbing 11.4 points to 7.7. The new orders index turned positive, rising 7.6 points to 6.6, while the shipments index jumped 21.3 points to 16.3, its highest level in over a year. Unfilled orders improved from -14.9 to -8.2, while inventories slipped 6.1 points to -2.1, indicating business inventories have started to decline. Delivery times lengthened, and supply availability improved but remained negative, increasing 2.8 points to -4.1.

Employment fell in January, with the index for the number of employees plunging 16.5 points to -9.0. Meanwhile, the average employee workweek declined to -5.4 from 2.5, signaling a decrease in hours worked from December. The prices paid index stepped down 1.4 points to 42.8, while the prices received index dropped 11.0 points to 14.4, a reflection of a slower pace of increase in both prices received and prices paid.

In January, firms’ optimism regarding the future declined slightly but remained high. The future business activity index edged down 3.2 points to 30.3. In the next six months, new orders are expected to rise but at a slightly slower pace compared to the prior month at 33.3. The future employment index rose 7.1 points to 14.9, suggesting an anticipated faster pace of employment growth over the next six months. Meanwhile, input and selling price expectations are forecasted to increase at a slower pace, falling from 55.4 to 52.6 and from 41.6 to 36.5, respectively. Furthermore, capital spending plans strengthened from December, up from 6.9 to 10.3.

In January, Philadelphia’s regional manufacturing activity rose to its highest level since September, with the index for general business activity jumping from -8.8 to 12.6. This month, 23.1% of firms reported increases in activity, while just 10.5% of firms noted decreases. The indexes for new orders and shipments both moved up, rising from 5.7 to 14.4 and from 3.2 to 9.5, respectively. Meanwhile, the employment index declined to 9.7 points as the average employee workweek shrunk 3.4 points to 9.1.

The prices paid index decreased from 49.3 to 46.9, its second consecutive monthly decline, while the prices received index rose from 26.0 to 27.8. As has been the case for many months, the prices received index remained lower than the prices paid index, indicating that manufacturers have been absorbing a portion of higher costs paid.

Looking ahead, indicators showing expectations for future growth declined for the second consecutive month but remained positive. After decreasing 8.0 points in December, expectations for future business activity fell 12.6 points to 25.5 in January. The drop came from a loss in the proportion of firms expecting an increase in activity (34.9%). At the same time, the number of firms anticipating a decrease in activity (9.3%) was down from 12.6% in December. The future new orders index slipped from 39.1 to 32.9, but the future shipments index edged up from 39.9 to 40.8. At the same time, the capital expenditures index grew from 29.1 to 30.3. The future prices paid and prices received indexes increased from 64.6 to 66.6 and from 57.2 to 61.8, respectively. Additionally, the index for future employment rose from 24.7 to 28.8.

In January, firms were asked to estimate changes in various costs over the past year and anticipate changes coming in 2026. Of those responses, firms said their costs for wages, health benefits and non-health benefits rose 5.3% during 2025. Looking forward, firms expect the average costs for these to climb 6.5% in 2026. Meanwhile, firms anticipate the increase in the cost of energy, other raw materials and intermediate goods to slow over the next 12 months. When asked about factors influencing their pricing decisions for their products, maintaining steady profit margins (77%), wages and labor costs (75%) and strength of demand as well as nonlabor costs (both 74%) were cited as most important to firms.

The Producer Price Index for final demand (also known as wholesale prices) rose 0.2% over the month in November, after prices inched up 0.1% in October. Over the year, producer prices moved up 3.0% in November, up from 2.8% in October. Meanwhile, prices for final demand excluding foods, energy and trade services increased 0.2% over the month in November after rising 0.7% in October. Prices for these goods advanced 3.5% from November 2024, the largest 12-month increase since March.

Within final demand, prices for services stayed the same in November after rising 0.3% in October. Meanwhile, prices for goods jumped 0.9%, the largest increase since February 2024. Within the final demand services index, prices for bundled wired telecommunications access services moved up 4.6%, while margins for health, beauty and optical goods retailing fell 4.3%. Within the final demand goods index, prices for final demand energy climbed 4.6%, accounting for over 80% of the November increase. The price for gasoline was the primary contributor of that increase, surging 10.5%, while prices for residual fuels declined 8.6%.

Processed goods for intermediate demand stepped up 0.6% in November, the largest increase since July. Nearly three-fourths of the November advance can be attributed to a 12.4% jump in the prices for diesel fuel. The indexes for gasoline, primary nonferrous metals, commercial electric power, utility natural gas and jet fuel also rose. On the other hand, the prices for sugar and confectionary products decreased 1.3%. Over the year, the index for processed goods for intermediate demand rose 3.6%.

Meanwhile, prices for unprocessed goods for intermediate demand advanced 0.4% in November, the first increase since July. The growth was led by a 1.4% rise in unprocessed energy materials, with the 10.8% gain in the index for natural gas being a major factor. At the same time, prices for unprocessed foodstuffs and feedstuffs declined 0.9%. Over the year, prices for unprocessed goods for intermediate demand inched up 0.1%.

In December, consumer prices increased 0.3% from November and 2.7% over the year, unchanged from the 2.7% annual rise in November. Core CPI, which excludes more volatile energy and food prices, rose 0.2% from November and 2.6% over the year, also unchanged from the 2.6% 12-month increase in November.

Energy costs advanced 2.3% over the year in December, after rising 4.2% year-over-year in November. Within the energy index, gasoline prices declined 3.4% over the year, while fuel oil prices jumped 7.4%. Meanwhile, electricity prices increased 6.7% year-over-year, and natural gas prices surged 10.8%.

In December, food prices grew 3.1% over the year, after increasing 2.6% year-over-year in November, while prices for food at home advanced 2.4%. Meanwhile, prices for food away from home climbed 4.1% from December 2024, up from the 3.7% year-over-year increase in November. Of the different food groups, beef and veal and coffee continue to rise at the fastest pace, soaring 16.4% and 19.8% over the year, respectively.

The shelter index grew 0.4% from November and 3.2% over the year, the greatest factor in the all-items monthly increase and ticking up from the 3.0% annual gain in November. Meanwhile, prices for used cars and trucks decreased 1.1% over the month but rose 1.6% over the year, while new vehicle prices stayed the same over the month and ticked up 0.3% from December 2024. Relatedly, prices for motor vehicle maintenance and repair jumped 5.4% year-over-year.

Although the headline inflation rate did not accelerate from November, it is still elevated from earlier last year. Federal Reserve officials cut their interest rate target at their prior three meetings, but markets anticipate that the Federal Open Market Committee will not lower its interest rate target at this month’s meeting. While risks to the Federal Reserve’s employment mandate remain elevated, so do risks to inflation, and those two risks may be coming into balance again.

Industrial production rose 0.4% in December, while manufacturing output increased 0.2% after moving up 0.4% in November. At 97.4% of its 2017 average, manufacturing production advanced 2.0% from December 2024. Capacity utilization for manufacturing was 75.6%, unchanged from November but up 1.1% over the past year. Capacity utilization remains 2.6 percentage points below its long-term average from 1972 to 2024.

In December, most major market groups posted gains. Consumer goods production grew 0.7%, while business equipment output increased 0.8%. The decline in production of consumer durables (down 0.7%) was led by home electronics’ output falling 1.4%, while the index for consumer nondurables rose 1.1%, experiencing gains in all but two of its categories. Among business equipment, the 1.7% gain in defense and space equipment more than offset a 0.2% loss in the index for information processing equipment. At the same time, the index for materials ticked up 0.2%, while the index for construction supplies inched down 0.3%, and the index for business supplies remained unchanged in December.

Durable goods manufacturing advanced 0.1% in December and 3.1% from the year prior. Monthly growth was greatest for primary metals (up 2.4%), while wood products posted the largest decline (down 2.3%). Meanwhile, led by a 1.8% gain in petroleum and coal products output, nondurable goods manufacturing increased 0.3% in December and 1.0% from December 2024.

Artificial intelligence, the manufacturing labor shortage, training programs and more—all were covered in a recent episode of the “Workforce 4.0” podcast, featuring Manufacturing Institute President and Executive Director Carolyn Lee.

What’s going on: Among the first topics addressed by Lee last week when she chatted with podcast host Ann Wyatt for the episode “Manufacturing Hiring Trends: And What Employers Need To Know In 2026” was the still-persistent concern that AI will “take” jobs from human workers.

• “[W]hen you ask the average manufacturer, especially a large manufacturer, they would say they’ve been working with robotics and automation for many years now,” Lee told Wyatt. “This is not new. … Large language models and generative AI [are] new … but … manufacturers have [always] been at the forefront of technology evolution and innovation, and it has not eliminated all people. I see people wherever I go.”
• In fact, the more widespread automation and other AI applications have become, the more appealing some of the work has become. Lee told the story of a manufacturing worker nearing retirement age who told her, “I’ve been in this sector for 40 years. I’m 65. I want to stay longer because the job is safer. It’s interesting, I’m learning more in the last five years than I’ve learned my entire previous career, and I’m excited for what’s to come.”
• Manufacturers just need to train their workforces on the technology so their teams “are able to evolve” with it.

Humans in demand: Human workers are still very much in demand. In fact, the manufacturing industry still has a dearth of about 400,000 workers—a shortfall that, if current trends continue, will grow to 1.9 million by 2033, Lee said, citing data from a joint MI–Deloitte 2024  report.

• “When we do this updated paper, which will be in ’27, I think it will show a much bigger number because our retirements will have continued … [and] all this domestic investment is going to create new jobs,” she went on. That, coupled with the advancement of AI, will make workforce training—the kind the MI does—and worker upskilling even more important.

FAME-ously crucial: Lee and Wyatt discussed the Federation for Advanced Manufacturing Education (FAME), a national apprenticeship-style training program started in 2010 by Toyota and now run entirely by the MI.

• FAME now has “over 42 chapters in 17 states, training thousands of students in maintenance for an [Advanced Manufacturing Technician] degree,” according to Lee.
• “It is really an employer-led model where the employers are driving that commitment, driving the training, working in concert with community colleges and then local business entities to help support that network,” she said. “And then you’re growing the pool of talent and you’re building practices to solve this together so that we’re not fighting over a shrinking pool; we’re actually growing that pool.”

Nonfarm payroll employment ticked up by 50,000 in December. Meanwhile, October and November’s job gains were revised downward by 76,000 to a loss of 173,000 jobs and a gain of 56,000 jobs, respectively. Following the government shutdown, employment is still down by 67,000 from September. The 12-month average stands at 49,000 job gains per month. On the other hand, the unemployment rate edged down 0.1 percentage point from November to 4.4% in December, while the labor force participation rate also ticked down 0.1 percentage point to 62.4%.

Manufacturing employment decreased by 8,000 in December, the eighth consecutive month of job losses, after slipping by 2,000 in November. On the other hand, the collective job losses in September and October of 14,000 were revised upward by 3,000 jobs to a decrease of 11,000 jobs. Manufacturing employment is down 68,000 over the year. Durable goods manufacturing employment edged down by 3,000 in December, while nondurable goods employment fell by 5,000. The most significant gain in manufacturing in December occurred in miscellaneous manufacturing, which added 1,800 jobs over the month. Meanwhile, the most significant loss occurred in plastics and rubber products manufacturing, which shed 4,900 jobs over the month.

The employment-population ratio inched up 0.1 percentage point from November to 59.7% in December but is down 0.2 percentage points from a year ago. Employed persons who are part-time workers for economic reasons declined by 146,000 from November to 5.34 million in December and are up from 4.36 million in December 2024. Native-born employment is down 656,000 from November but up 2,043,000 over the year. Meanwhile, foreign-born employment is up 310,000 over the month and 383,000 over the year. At the same time, the native-born unemployment rate is up 0.4 percentage points over the year to 4.1% in December, while the foreign-born unemployment rate is down 0.2 percentage points to 4.1%.

Average hourly earnings for all private nonfarm payroll employees rose 0.3%, or 12 cents, reaching $37.02. Over the past year, earnings have grown 3.8%. The average workweek for all employees edged down 0.1 hour to 34.2 hours and by 0.2 hours to 39.9 hours for manufacturing employees.

The U.S. Consumer Product Safety Commission has issued multiple warnings urging consumers to immediately stop using certain imported mattresses that fail mandatory federal flammability standards. The alerts follow a pattern of recent recalls targeting noncompliant products that pose a risk of serious injury or death from fire.

What’s going on: The CPSC recently warned consumers to stop using Crayan mattresses after finding they violated the federal flammability rule, citing a serious fire hazard. The Chinese firm has been uncooperative in the implementation of a June 2025 recall.

• The warning builds on similar action last fall involving Elitespace mattresses, after the noncompliant seller, Foshanshiyiliangjiajukejiyouxiangongsi, of China, doing business as Elitespace Home, failed to recall their product or offer a remedy to consumers.

Dangerous competition: Noncompliant imports undercut responsible manufacturers by avoiding safety requirements, endangering American consumers. Allowing these unsafe products to stay on the market creates dangerous competition, rewarding copycats who cut corners while exposing families to preventable fire risks.

• These recalls demonstrate how appropriate enforcement can help level the playing field and keep consumers safe.

The NAM says: “Manufacturers are committed to keeping American families safe,” said NAM Vice President of Domestic Policy Jake Kuhns. “CPSC oversight of noncompliant products is vital to protecting families and the manufacturers that play by the rules.”

Washington, D.C. – Manufacturers continue to report a mixed bag of economic challenges, according to the National Association of Manufacturers Q4 2025 Manufacturers’ Outlook Survey. As manufacturers began feeling the positive impacts of the tax bill and the president’s regulatory agenda on their business, optimism ticked up, but trade uncertainties loom, and health care costs continue to rise as a top concern for manufacturers.

“In line with the improvement in the outlook, companies expect most indices to improve marginally over the next 12 months,” said NAM Chief Economist Victoria Bloom. “For example, manufacturers predict sales will increase 2.8%, up from 2.6% in Q3, and capital investments will grow 1.4%, up from 1.0% in the prior quarter. That said, while sentiment has improved, we are still below the historical average of 74%.”

Optimism rose 4.9 percentage points, with 69.9% of respondents reporting a positive outlook for their companies, up from 65.0% in Q3. Yet, in line with last quarter, trade uncertainties remained the top business challenge at 73.1%, with 80.3% of respondents reporting they have paid tariffs on imported manufacturing inputs since the start of the year. Additionally, rising health care and insurance costs rose to manufacturers’ second-highest business concern at 70.2%, with more than 94% of manufacturers expecting higher health insurance premiums in 2026, projecting an average jump of 11%. A weaker domestic economy and sales to U.S. customers ranked as the third-highest concern at 60.1%.

Other Key Survey Findings:

• A majority of manufacturers (80.3%) report paying tariffs on imported manufacturing inputs since the start of 2025, led by 58.6% of respondents paying Section 232 tariffs, 52.1% paying reciprocal tariffs on other countries under the International Emergency Economic Powers Act and 50.0% paying Section 301 tariffs on China.
• Tariffs are impacting manufacturers of all sizes, with 72.8% of small and medium-sized manufacturers with fewer than 500 employees paying tariffs on inputs this year—alongside 97% of large manufacturers.
• When it comes to hiring needs, 72.1% of respondents cite skilled production workers (technicians, welders and machinists), 60.1% point to core production workers (operators, assemblers and packaging) and 33.5% say they need high-skilled, degreed workers (scientists, researchers and engineers).
• Climate disclosure regulations are costing manufacturers, with more than one-third (38.2%) of manufacturers subject to new international or state laws and regulations requiring disclosure of emissions and climate risks. Of those respondents, 91.6% face increased reporting costs and are diverting funds from productive uses to pay these added costs.
• 82.3% of respondents indicated it is important to their companies for Congress to pass legislation maintaining robust, multiyear infrastructure investment to support manufacturing.

The NAM releases these results to the public each quarter. Further information on the survey is available here.

-NAM-

The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs nearly 13 million men and women, contributes $2.90 trillion to the U.S. economy annually and accounts for 53% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org.

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