American manufacturing expanded for the 10th consecutive month in October, exceeding economists’ expectations as factory production accelerated, new orders increased and raw material price pressures eased despite persistent inflation concerns.
By yourNEWS Media Newsroom
WASHINGTON — U.S. manufacturing activity accelerated in October, with factory production expanding at its fastest pace in nearly five years and overall industry growth exceeding economists’ forecasts, according to new data released Monday, Nov. 2, by the Institute for Supply Management.
The organization’s manufacturing purchasing managers index rose to 55.5 in October from 54.5 in September, marking the sector’s 10th consecutive month of expansion and its second-highest reading in more than four years.
The result exceeded all but one forecast in a Bloomberg survey of economists, providing further evidence of sustained demand for American-made goods as manufacturers increased output and replenished inventories.
According to the Institute for Supply Management’s October manufacturing report, production climbed to 59.0 from 56.7 in September, its highest reading since November 2021, when the index reached 60.5.
A PMI reading above 50 indicates expansion, while a reading below 50 generally signals contraction. The October result therefore indicates that manufacturing activity continued growing and did so at a faster pace than the previous month.
Susan Spence, chair of ISM’s Manufacturing Business Survey Committee, said the results reflected improving production, continued demand and expansion across the industry’s major components.
“The Manufacturing PMI registered 55.5 percent in October, 1 percentage point above the September figure of 54.5 percent,” Spence said.
The report showed that all five components used to calculate the headline manufacturing index were in expansion territory, compared with four in September.
New orders increased for the 10th consecutive month, with the index rising to 55.5 from 55.3.
The production index increased 2.3 points, indicating that manufacturers accelerated output to meet existing and anticipated demand.
Employment remained in expansion territory for the fourth consecutive month, although the employment index slipped slightly to 52.4 from 52.7.
Factory inventories also returned to growth, with the inventories index rising to 51.4 from 48.6 in September.
The combination of stronger production, continued increases in new orders and expanding inventories suggests that businesses are responding to sustained demand by increasing manufacturing activity.
The report also showed growth across several major manufacturing industries.
Computer and electronic products, transportation equipment, machinery and chemical products were among the sectors reporting increased production and new orders.
Of the six largest manufacturing industries, five reported overall expansion during October.
The findings are particularly significant because manufacturing experienced an extended period of contraction before returning to growth earlier this year.
The October reading marked the 10th consecutive month of expansion following 10 months of contraction.
ISM also reported that the broader U.S. economy expanded for the 24th consecutive month, based on the historical relationship between its manufacturing index and overall economic activity.
Spence said the October manufacturing reading historically corresponds to annualized real gross domestic product growth of approximately 2.7%, although the relationship is an indicator rather than an official GDP estimate.
The manufacturing figures follow reports of continued strength in the broader economy.
According to Reuters’ Nov. 2 economic assessment, the U.S. economy expanded at an annualized rate of 3.4% during the third quarter, supported by domestic demand and business investment.
Investment in artificial intelligence infrastructure, data centers, semiconductor production and related equipment has contributed to demand for manufactured goods.
Businesses involved in electrical equipment, electronics, machinery and transportation have benefited from increased capital expenditures and industrial activity.
However, manufacturers continue facing elevated costs for raw materials, energy and certain imported components.
The ISM prices-paid index declined to 75.2 in October from 77.9 in September, indicating that input prices were still increasing but at a slower rate.
The decline represents an easing of inflationary pressure rather than an outright reduction in the prices manufacturers pay for materials.
The prices index has remained in expansion territory for 25 consecutive months.
Manufacturers continued reporting higher costs for steel, aluminum, copper, electronic components, fuel and other essential inputs.
Spence attributed the persistent pressure partly to higher metals prices, tariffs on imported goods and rising petroleum-related expenses associated with the conflict in the Middle East.
Higher raw material costs can affect manufacturers’ profit margins and may eventually be reflected in the prices businesses charge customers.
The report found that 53.1% of surveyed manufacturers experienced higher input prices in October, down from 58.6% in September.
That improvement suggests some moderation in cost pressures, although the overall prices index remains elevated by historical standards.
Supplier delivery times also continued lengthening.
The supplier deliveries index rose to 59.1 from 59.0, indicating that manufacturers continued experiencing slower deliveries of materials and components.
Unlike most PMI components, a higher supplier deliveries index indicates longer delivery times.
Slower deliveries can accompany stronger demand, but they can also reflect supply shortages, transportation disruptions or other production constraints.
Manufacturers identified shortages of electrical components, electronic parts, memory products, integrated circuits, printed circuit boards and certain metals.
Those shortages have become important as demand grows for artificial intelligence infrastructure and advanced computing equipment.
The report also found that manufacturers’ order backlogs continued expanding, although at a slower pace.
The backlog index declined to 54.6 from 56.4 in September, indicating that unfilled orders were still increasing but less rapidly.
Export orders also improved, with the new export orders index rising to 51.2 from 50.9.
Imports increased at a faster pace, with the imports index climbing to 52.9 from 51.0.
The figures suggest continued activity in international supply chains despite tariffs, trade-policy uncertainty and higher transportation costs.
Manufacturing employment remained positive, providing an additional indication of continued industrial activity.
Although the employment index edged lower, its October reading of 52.4 remained above the expansion threshold.
The employment measure reflects purchasing managers’ assessments of hiring conditions rather than a direct count of jobs added to the economy.
It therefore should not be interpreted as equivalent to the federal government’s monthly employment report.
Nevertheless, the continued expansion in the employment index suggests that manufacturers have maintained staffing levels to support production and order fulfillment.
The latest figures also arrive as the Federal Reserve weighs the strength of economic growth against persistent inflation.
The central bank has maintained its benchmark interest rate in a range of 3.75% to 4.00%, while acknowledging that inflation remains above its long-term target of 2%.
Continued manufacturing growth can support employment and economic output, but elevated input costs may complicate efforts to reduce inflation.
Economists are monitoring whether businesses can increase production sufficiently to meet demand without passing substantial additional costs to customers.
The report also highlights the distinction between stronger industrial activity and the financial pressures businesses continue to face.
Manufacturers are producing more goods and receiving additional orders, but rising prices for critical materials and shortages of electronic components remain challenges.
Trade-policy uncertainty has also influenced decisions concerning inventories, investment and long-term contracts.
Some manufacturers have increased their purchases of materials to protect against potential shortages or future price increases.
Others remain cautious about committing to major new investments while costs and international trade conditions remain uncertain.
The October manufacturing report nevertheless provides an encouraging indication of industrial activity entering the final months of 2026.
Production reached its highest level in nearly five years, new orders continued expanding, employment remained positive and inventories returned to growth.
With manufacturing growth exceeding most economists’ expectations, the report points to continued momentum in an important part of the U.S. economy.
The remaining uncertainty centers on whether manufacturers can sustain that pace while managing elevated material costs, supply constraints and broader inflation pressures.
As the United States approaches Tuesday’s midterm elections, the latest figures offer another measure of the economy’s performance, showing a manufacturing sector that continues to expand even as businesses confront persistent challenges involving prices and supply chains.
Original article
Comments