Economic activity in the U.S. manufacturing sector expanded in October for the 10th consecutive month to 55.5%, 1 percentage point higher than September, according to the Institute for Supply Management’s latest Purchasing Managers’ Index.
A figure below 50% indicates an industry in contraction. The overall economy grew for the 24th month in a row, ISM reported.
Meanwhile, the S&P Global U.S. Manufacturing PMI registered 54.9, down one point from September.
The Iran war and price volatility continue to weigh down the manufacturing sector despite 10 months of expansion, Susan Spence, chair of ISM’s Manufacturing Business Survey Committee, said on a call Monday. According to Spence, more respondents expressed concern about prices and other issues this month than in September.
“The increase in negative sentiment is really all about the inflationary pressures and the constraint in availability of raw materials, made worse by the Iran War and trade wars,” she said.
Five of the six largest manufacturing industries — machinery; computer and electronic products; transportation equipment; chemical products; and food, beverage and tobacco products — expanded in October.
The New Orders Index expanded for the 10th consecutive month after four straight readings in contraction, registering 55.5%, up 0.2 percentage points from September.
The Production Index registered 59% in October, or 2.3 percentage points higher than September.
The Prices Index remained in expansion, registering 75.2%, a 2.7-percentage point decrease compared to September’s reading of 77.9%.
The Backlog of Orders Index registered 54.6%, down 1.8 percentage points from September.
The Employment Index reading of 52.4% was down 0.3 percentage points from September’s. The manufacturing industry added 9,000 jobs in September.
The Supplier Deliveries Index indicated slowing performance for the 11th month in a row after one month in “faster” territory. The reading of 59.1% was up 0.1 percentage points from September. Supplier Deliveries is the only ISM PMI Report index in which a reading of above 50% indicates slower deliveries.
The Inventories Index returned to expansion and registered 51.4%, up 2.8 percentage points compared to September. The Customers’ Inventories Index reading remained level at 41.6%.
The New Export Orders Index gained 0.3 percentage points in October to 51.2%. The Imports Index registered 52.9%, up 1.9 percentage points from September.
Three of four demand indicators — new orders, backlog of orders and new export orders — remained in expansion, and the Customers’ Inventories Index stayed in ‘too low’ territory, contracting at the same rate as last month. A “too low” status for the Customers’ Inventories Index is usually considered positive for future production.
Respondents increasingly pessimistic about war, tariffs, lead times
“General sentiment got worse for the third month in a row,” Spence said, with 34% of the comments considered positive and 66% negative. Even many of the overall positive comments mentioned something negative, she added.
Much of the negative sentiment had to do with inflation. “Prices, unfortunately, are in their 25th straight month of increase,” Spence said.
“‘Negative, inflation, in the red’ are the three words or phrases that best describe our strategic sourcing for 2026,” one respondent in the chemical products industry said. “We generally assume inflation at 2 percent to 3 percent year over year, and we usually do a great job keeping costs under the 2-percent increase. This year, costs are up more than 6 percent, and we are not doing much to keep any of the spend categories under the target.”
Respondents also said that lower overall demand and an uncertain political climate are adding to the economic pressures.
“Global demand for capital scientific instrumentation assets has slowed due to continued uncertainty in the Middle East, Eastern Europe and China,” a respondent in the computer and electronic products industry said. "Anticipation over the midterm elections and impact to funding for scientific research and the National Institutes of Health also is impacting customers’ purchasing behavior, making them focus on optimizing existing technology and tools.”
Shifting tariff and other U.S. policies aren’t helping, respondents said.
“Economic policies coming out of Washington continue to weigh on business conditions,” said one respondent in the fabricated metal products industry. “Customers are unwilling to make commitments to anything other than the shortest term due to the vast uncertainty. Canadian tariffs continue to damage small U.S. businesses selling into that important market.”
Even surging demand for semiconductors has a negative side, according to a respondent in that industry.
“Explosive growth in the semiconductor and government/defense spaces has put us on our heels as we try to work through demand,” the respondent said. “The long-awaited wave has arrived for our company, and it seems the global supply chain is in similar straits. Lead times and prices are increasing, and some carry COVID-19 era delays — four weeks is now 50 weeks; a US $2,000 item six months ago is now $4,000. We are hand-to-mouth. All the while, our customers are breaking down the doors complaining about our delivery delays.”
Spence said she doesn’t expect pricing to be “calming down anytime soon” until geopolitical tensions and the “trade war” subside.
“I remain convinced that we are being held back from a bigger push in expansion,” she said. “I can only wonder if we had the war over or resolved or super close to resolution, I feel like the floodgates would open.”
