US factories kept expanding in September, but the cost of what they buy rose sharply. The Institute for Supply Management (ISM) reported on October 1, 2026 that its Manufacturing PMI registered 54.5%, barely changed from 54.6% in August. Any reading above 50 indicates that the manufacturing economy is growing. The prices index, however, jumped 6.8 points to 77.9, one of the more notable moves in the report.
The September readings
| ISM index | September | August | Change |
|---|---|---|---|
| Manufacturing PMI | 54.5 | 54.6 | -0.1 |
| New Orders | 55.3 | 53.7 | +1.6 |
| Production | 56.7 | 58.3 | -1.6 |
| Employment | 52.7 | 51.2 | +1.5 |
| Prices | 77.9 | 71.1 | +6.8 |
| Backlog of Orders | 56.4 | 51.8 | +4.6 |
| Supplier Deliveries | 59.0 | 59.3 | -0.3 |
| Inventories | 48.6 | 50.6 | -2.0 |
| Imports | 51.0 | 52.5 | -1.5 |
Source: ISM September 2026 Manufacturing PMI Report.
How to read a PMI
The ISM survey asks purchasing managers whether conditions such as orders, output and hiring are better, the same or worse than the prior month. Readings above 50 mean more respondents report increases than decreases. The index measures breadth, not size: a reading of 54.5 does not mean output grew 54.5%, only that growth was widespread. Because it is a diffusion index, it is also a monthly sentiment-and-activity snapshot that can be revised through seasonal adjustment updates.
ISM Manufacturing Business Survey Committee Chair Susan Spence noted that manufacturing has now expanded for nine consecutive months and that the overall economy, by ISM’s measure, has grown for 23 months. Production has expanded for 11 straight months, although the pace slowed in September.
Orders and backlogs strengthened
New Orders and Employment were the only subindexes to grow faster than in August. New orders rose to 55.3, and the backlog of orders climbed 4.6 points to 56.4. Growing backlogs can signal that demand is outrunning capacity or that production is being delayed, and they can support future output. Supplier deliveries at 59.0 indicate that deliveries are slowing, which in this index is read as a sign of tighter supply chains; slower deliveries raise the headline PMI even though they are not necessarily a positive for businesses.
Prices are the story
The prices index rose to 77.9 from 71.1. According to ISM, 58.6% of respondents reported paying higher prices. Spence said the increases were driven by steel and aluminum costs, tariffs and increases in petroleum-based products tied to the conflict in the Middle East, and that the reading is close to its level in March “at the beginning of the Iran war.”
This is a survey of input costs, not consumer prices, but it is relevant for households. Higher costs for manufacturers can show up later in producer prices and, depending on competition and demand, in what consumers pay. Whether firms pass costs along or absorb them in margins is uncertain, and the pass-through can take months. Producer and consumer inflation are covered by other writers on this site.
Hiring and inventories
The employment index rose to 52.7 from 51.2, meaning more manufacturers reported adding workers than cutting them. That is broadly consistent with the Bureau of Labor Statistics’ September report, which showed manufacturing payrolls up 9,000. The gain is small, and a survey reading and an actual payroll count are different measures, but the two do point in the same direction.
Inventories fell back to 48.6, into contraction, and ISM said customers’ inventories stayed in “too low” territory at 41.6. Low customer inventories can encourage restocking orders, which may support factory demand, though they can also reflect cautious buying when costs are rising.
Why it matters
- Growth backdrop: A PMI in the mid-50s is consistent with expansion, offering a counterweight to softer readings from the labor market and consumer sentiment.
- Cost pressure: A prices index near 78 suggests many manufacturers face rising input bills, which could squeeze margins or lift selling prices.
- Tariff and energy exposure: Metals costs, tariffs and petroleum-linked inputs are cited as drivers, so developments in those areas matter for the sector.
What to watch next
The October ISM manufacturing report is due at 10:00 a.m. ET on Monday, November 2, 2026. Watchers will look at whether the prices index holds near its recent peak, whether production growth re-accelerates after slowing in September, and whether backlogs convert into output. The Bureau of Economic Analysis will also publish its first estimate of third-quarter GDP on October 29, which will show how much manufacturing-related investment and inventories contributed.
One survey does not define the industrial economy, and ISM readings are best viewed as part of a trend. For now, the September report shows a sector that is growing but facing higher costs.
This article is for informational purposes only and is not investment advice.
Sources: ISM September 2026 Manufacturing PMI Report (as republished by miningstockeducation.com); TrendForce Datatrack (August 2026 ISM summary); U.S. Bureau of Labor Statistics (Employment Situation, September 2026); InvestingLive (GDPNow update, October 15, 2026).