Macro
US Manufacturing Index Rises to 55.5 in October on Strongest Output Since 2021 While Price Pressures Stay High
Image: jannonivergall via Pixabay
The ISM gauge topped forecasts, but the prices-paid reading remained above 75 and respondents flagged tariffs, lead times and the Iran war.
By Emma Cruz ·
U.S. factory activity expanded faster than expected in October, with the Institute for Supply Management's manufacturing index rising to 55.5% from 54.5% in September, according to the group's report released at 10 a.m. ET on Monday [1]. Economists had expected a reading near 54.6, according to Yahoo Finance's market coverage [2]. A reading above 50 signals expansion, and the ISM said October was the tenth straight month of manufacturing expansion [1].
Output did most of the work. The production index rose 2.3 points to 59.0, which Yahoo Finance described as the highest since November 2021 [1][2]. New orders were nearly unchanged at 55.5 versus 55.3 in September, while the employment index slipped to 52.4 from 52.7, so the report points to firmer production without a matching pickup in hiring [1]. Inventories rose to 51.4 from 48.6, and imports increased to 52.9 from 51.0. New export orders edged up to 51.2 from 50.9 [1].
Prices remain the sore point. The prices index fell to 75.2 from 77.9, a decline, but it still sits far above the 50 line, meaning input costs are still rising for many manufacturers [1]. Supplier deliveries were at 59.1, indicating slower delivery times, and the backlog of orders eased to 54.6 from 56.4 [1]. The ISM noted that, based on its past relationship with the economy, a PMI at this level corresponds to annualized real GDP growth of roughly 2.7% [1].
Respondents were more cautious in their written comments than the headline suggests. Among negative comments, 62% cited pricing volatility, 41% cited longer lead times, 25% cited tariffs and 21% named the Iran war, according to the ISM [1]. Companies tied to data centers, critical infrastructure, semiconductors and defense described strong demand, while others reported weaker orders. One respondent in transportation equipment said customers remain in "wait-and-see mode" and that there is no fourth-quarter budget increase this year [1].
By industry, five of the six largest manufacturing sectors expanded: machinery, computer and electronic products, transportation equipment, chemical products, and food, beverage and tobacco products. Twelve industries grew overall, led by plastics and rubber products and electrical equipment, while printing, paper products and nonmetallic mineral products contracted [1].
A second survey was softer. S&P Global's U.S. manufacturing PMI came in at 54.9, down from 55.9 in September and below its preliminary reading of 56.0, Yahoo Finance reported [2]. The two gauges are compiled with different samples and methods, so a gap between them is not unusual, but together they show factory activity remaining solidly in expansion territory while momentum is mixed.
For markets, the report arrives alongside a rebound in stocks and a sharp drop in oil prices on Monday, and it is a data point on two competing concerns: growth that is holding up and cost pressure that has not gone away [2]. A prices index above 75 points to continued cost pressure on producers, which matters for how investors read inflation risk in the weeks ahead. Weaker hiring inside the factory sector, shown by the employment index drifting lower, is a smaller offsetting signal.
The next ISM manufacturing report, covering November, is scheduled for December 1 at 10 a.m. ET [1]. Readers watching the data will want to see whether the prices index continues to ease and whether the strength in production translates into new orders and hiring.
Sources:
[1] Institute for Supply Management, "Manufacturing PMI at 55.5%; October 2026 ISM Manufacturing PMI Report", November 2, 2026. https://www.prnewswire.com/news-releases/manufacturing-pmi-at-55-5-october-2026-ism-manufacturing-pmi-report-302925617.html
[2] Yahoo Finance, "Stock market today: Dow, S&P 500, Nasdaq recover from bruising sell-off as oil prices fall", November 2, 2026. https://finance.yahoo.com/markets/live/stock-market-today-monday-november-2-dow-sp-500-nasdaq-091835095.html
This article was produced with AI assistance. It is for informational purposes only and is not financial advice. StockVolt and its authors may hold positions in securities mentioned.