Effective supply management remains important for US manufacturing leaders despite the sector’s ninth consecutive month of growth, as manufacturers face concerns over prices, trade policy and geopolitical uncertainty. Data released on 1 October 2026 show the sector continuing to expand amid an increasingly uncertain operating environment.
The Institute for Supply Management (ISM) reported a Manufacturing PMI® reading of 54.5 for September, down 0.1 percentage point from August’s 54.6. A reading above 50 indicates expansion, and September marked the ninth consecutive month of growth for the manufacturing sector. The broader US economy has also grown for 23 straight months, the ISM reported.
Manufacturing indicators show mixed performance
While the headline PMI indicates expansion, the sub-indices show that manufacturers continue to face several pressures. Demand indicators largely remained positive, but production growth has moderated, and concerns surrounding input costs have intensified. This divergence creates uncertainty for operational planning and investment decisions.
The S&P Global US Manufacturing PMI provided a contrasting reading at 55.9, up two points from August. Its flash estimate reached 57.0, up from August’s 53.9 and above the market expectation of 53.6. The final reading represented the strongest improvement in business conditions since May 2022.
These differences reflect variations in the methodologies used by the two indicators, highlighting the importance of considering both measures when assessing manufacturing conditions.
Demand holds, production slows
Demand indicators remained positive through September. The ISM’s New Orders Index expanded for the ninth consecutive month, climbing 1.6 percentage points to 55.3%. The increase was broad-based, with five of the six largest manufacturing industries—computer and electronic products; food, beverage and tobacco products; transportation equipment; machinery; and chemical products—reporting higher new orders.
The Backlog of Orders Index also increased, rising 4.6 percentage points to 56.4. The increase indicates a larger volume of outstanding orders. Concurrently, the Customers’ Inventories Index remained in “too low” territory, contracting at a faster rate to 48.6%. The ISM considers this “too low” level a positive signal for future production because customers may need to replenish their inventories.
However, the Production Index fell 1.6 percentage points to 56.7 in September. Although the index remained above 50, it recorded its lowest reading since June. Susan Spence, Chair of the Institute for Supply Management’s Manufacturing Business Survey Committee, observed that new orders have displayed an inconsistent “up-down pattern” since June. She also noted a similar “up-down pattern” in employment, indicating a lack of steady direction.
Employment expands amid uneven growth
The manufacturing labour market showed continued improvement, with the Employment Index rising 1.5 percentage points to 52.7%. This marked the third consecutive month of employment growth, following a 33-month period of contraction. The increase indicates continued expansion in manufacturing employment, although sentiment data point to continued uncertainty.
Inflationary pressures and supply chain challenges
A notable development in the September report was the increase in the Prices Index. The Prices Index increased 6.8 percentage points to 77.9, its highest reading since May. The increase coincided with a rise in the share of respondents reporting higher prices, from 46.2% in August to 58.6% in September.
Susan Spence attributed the increase to several factors, including higher costs for steel and aluminium, tariffs on imported goods and rising prices for petroleum-based products linked to the conflict in the Middle East. No commodity category recorded a price decrease, while respondents reported price increases for aluminium, copper, steel, electronic components, semiconductors, freight, fuel and resins.
Supply-chain performance also remained under pressure. The Supplier Deliveries Index registered 59.0%, indicating slower-than-normal delivery times for a tenth consecutive month, a marginal 0.3 percentage point decrease from August. The slower supplier-delivery times indicate continued pressure on procurement and logistics operations.
Trade policy and global unrest shape sentiment
Despite continued expansion, comments submitted to the ISM indicated predominantly negative sentiment in September. In September, 60% of comments submitted to the ISM were negative, compared with 40% that were positive. The comments highlighted concerns about external factors affecting manufacturers’ businesses.
Pricing volatility was cited in 46% of negative comments, followed by tariffs at 34% and the conflict involving Iran at 30%. Susan Spence, Chair of the ISM Manufacturing Business Survey Committee, said that “sentiment is certainly worrisome”, citing tariffs imposed by the Trump administration on Canada and Canada’s retaliatory tariffs.
She also noted during a media call that “trade wars, chaos, whatever you care to call it, is really what’s affecting inflation.”
Many respondents highlighted specific challenges. For instance, manufacturers in the computer and electronic products industry reported difficulties with the US tariff schedule and with finding alternative supply sources outside China, alongside ongoing material and component shortages. Respondents in the machinery industry said tariffs had compounded existing problems despite increased orders, disrupting established supply chains and affecting lead times for government buyers.
Investment hesitancy persists
This uncertainty is also affecting some business investment decisions. For example, a transportation equipment industry respondent reported that customers are pushing out capital expenditure purchases indefinitely, awaiting more certainty on costs and demand. They noted that ongoing trade policies create considerable disruption and price increases.
If sustained, delayed capital spending could affect investment in new technology and production capacity, even as order books remain strong. Such hesitancy underscores the broader need for a stable policy environment to support sustained manufacturing growth, a key focus for organisations pushing for smart manufacturing initiatives.
Navigating future uncertainty
The September data show US manufacturing continuing to expand amid several external pressures. Demand indicators remained positive, but manufacturers continued to face higher input prices, geopolitical uncertainty and changes in trade policy. For manufacturers, the survey points to continued uncertainty around costs, trade policy and future investment conditions.
As Susan Spence, Chair of the ISM Manufacturing Business Survey Committee, articulated, “not being able to rely on a steady economic policy” is the primary concern for manufacturers. While the sector continues to expand, the survey comments indicate continued concern about the conditions affecting manufacturers. The survey comments indicate that policy uncertainty remains a concern for manufacturers.
