Corporate America is still expanding, but the pace is fading as 2025 closes. That matters because the Fed has been trying to cut rates without reigniting inflation, and recent policy volatility has already made planning harder for businesses. The latest “flash” survey suggests growth is losing momentum just as cost pressures build again.
S&P Global’s preliminary December composite PMI slipped to 53.0 from 54.2 in November, a six-month low. Services eased to 52.9 from 54.1, and manufacturing fell to 51.8 from 52.2. New orders softened across both sectors. The survey flagged the smallest rise in incoming new business in 20 months, and goods orders declined for the first time in a year.
The “how” is a familiar mix of demand uncertainty and policy whiplash. Reuters notes the year was shaped by tariffs and immigration crackdowns, plus the data disruptions from the shutdown. Firms reported hiring constraints from costs and weaker demand, even as some still cited labor shortages. That’s a sharp turn from the earlier narrative that the economy could glide into 2026 on a steady services engine.
The inflation angle is the kicker. Bloomberg reported the prices-paid gauge rose to 64.1, a more-than-three-year high, signaling renewed input-cost heat. For the Fed, that creates an awkward trade. Softer activity argues for easier policy. Hotter costs argue for patience. With jobs and CPI data recently distorted by the shutdown, survey evidence can sway sentiment even if it cannot settle the debate.
Watch for second-order effects. If weakening new orders persists into January, you should expect more cautious corporate guidance, slower hiring plans, and tighter discretionary spending from households.
Prepare for a “higher-for-longer, unless growth cracks” policy narrative. The next clean batch of inflation and labor data will decide whether this PMI wobble is a mid-cycle pause or the start of a broader downshift.
