US manufacturing activity accelerated in October, with the Institute for Supply Management’s Manufacturing Purchasing Managers’ Index (PMI) rising to 55.5 from 54.5 in September, as factory production reached its strongest level in nearly five years. However, manufacturers continued to face substantial input-cost pressures, even as the pace of price increases moderated.
The October ISM report, released November 2, showed manufacturing expanding for the tenth consecutive month. A reading above 50 indicates that activity is generally growing, rather than contracting.
The Production Index climbed to 59.0, its highest reading since November 2021, while the Prices Index fell to 75.2 from 77.9. That decline signaled slower price increases, not falling prices. The gap between stronger factory activity and persistent costs remains a central concern for manufacturers and economic policymakers.
Factory Production Strengthens
Production supplied much of October’s improvement. Its index increased 2.3 percentage points from 56.7 in September, extending a 12-month expansion streak. New orders also strengthened, with the index advancing to 55.5 from 55.3. Although the increase was modest, it marked a tenth consecutive month of expanding orders, indicating that manufacturers continued to receive additional demand.
Inventories provided another important contribution. The Inventories Index rose 2.8 points to 51.4, reversing September’s contraction reading of 48.6. All five components of the headline manufacturing PMI were consequently above the expansion threshold.
That improvement contrasts with earlier weakness in official industrial output figures. Investozora previously reported that industrial production stalled in August as manufacturing output declined.
The two measures should not be confused. ISM’s survey captures the direction and breadth of changes reported by manufacturing purchasing executives, while Federal Reserve industrial production statistics measure actual output. October’s survey nevertheless indicates a broad improvement in manufacturing conditions.
Of the six largest manufacturing industries, five reported growth: machinery, computer and electronic products, transportation equipment, chemicals, and food, beverages and tobacco. Overall, 12 of the 18 industries surveyed reported expansion, while three reported contraction.
US Manufacturing PMI, 2026
Monthly ISM diffusion-index readings
| Month | PMI | Direction |
|---|
Readings above 50 indicate manufacturing expansion; below 50 indicate contraction. Values are index readings, not monthly percentage growth rates.
Source: Institute for Supply Management, October 2026 Manufacturing PMI Report . Monthly diffusion-index readings; 50 marks the expansion/contraction threshold. ISM’s composite PMI includes seasonally adjusted component indexes. Data released November 2, 2026.
Input Prices Remain Elevated
Despite faster manufacturing growth, input costs remained a significant challenge. The ISM Prices Index declined 2.7 percentage points to 75.2 from September’s 77.9, but stayed well above the neutral threshold of 50. Raw material prices have now increased for 25 consecutive months, according to ISM.
Sixteen of the 18 manufacturing industries reported paying higher prices, while none reported broad price decreases. ISM attributed continuing pressure to higher steel and aluminum costs, tariffs affecting imported goods, and petroleum-related increases associated with the Middle East conflict.
The October survey also identified pricing volatility and longer supplier lead times among manufacturers’ concerns. These findings reinforce a broader inflation issue already visible in other economic indicators. Investozora’s coverage of September wholesale prices and U.S. import prices documented additional cost pressures across the economy.
The measures represent different parts of the pricing system. ISM’s diffusion index tracks how widely manufacturers report input-price increases; it does not measure the percentage increase in actual prices or directly establish changes in consumer inflation. Even so, persistently widespread cost increases can pressure manufacturing margins and influence selling-price decisions.
Employment Growth Moderates
Factory employment continued expanding, although momentum weakened slightly. The Employment Index slipped from 52.7 in September to 52.4 in October. It remained above 50 for the fourth consecutive month, indicating continued expansion among surveyed manufacturers. Four of the six largest manufacturing industries reported employment growth, according to ISM.
The moderation suggests that stronger production was not accompanied by equally strong employment momentum. Survey employment readings also differ from the Bureau of Labor Statistics’ payroll estimates. The ISM figures indicate whether hiring conditions are expanding across respondents, rather than measuring the number of jobs created.
For additional manufacturing context, Investozora has examined Philadelphia factory conditions and New York manufacturing, where regional business surveys have also tracked changes in activity and pricing pressures. Those regional surveys cover different manufacturing populations and cannot be directly substituted for the national ISM index.
Supply Chains Remain Strained
Supplier delivery times continued lengthening in October. The Supplier Deliveries Index edged up to 59.1 from 59.0. Unlike most PMI components, a reading above 50 in this index means deliveries are slowing. Slower deliveries can reflect stronger demand, supply constraints or both.
Meanwhile, the Backlog of Orders Index eased to 54.6 from 56.4, indicating that unfinished orders continued growing, but more slowly. Customers’ Inventories remained at 41.6, a level ISM characterizes as too low. Such conditions may support future replenishment orders, although they do not guarantee additional production.
Export orders increased slightly to 51.2, while the Imports Index climbed to 52.9. Together, the figures suggest manufacturers continued expanding output and purchasing activity despite widespread supply-chain and pricing challenges.
What Comes Next
October’s manufacturing improvement offers evidence of continued industrial expansion, but it does not resolve the economic tension between resilient demand and elevated costs. For the Federal Reserve, factory-price pressures are one part of a broader inflation assessment that also includes consumer prices, wages, employment and economic growth.
Investozora’s recent coverage of core PCE inflation provides additional context for why inflation remains central to monetary policy. The manufacturing survey alone cannot determine the direction of interest rates or establish how much factory-cost pressure will reach consumers.
The next ISM Manufacturing PMI report, covering November activity, is scheduled for December 1, 2026, at 10 a.m. Eastern Time. Its production, employment, new-orders and prices readings will help determine whether October’s acceleration is developing into sustained manufacturing momentumor whether elevated costs begin weighing more heavily on factories.
