US Manufacturing Growth Slows in August

The ISM Manufacturing PMI climbed to 55.5 in October 2026, up from 54.5 in September and comfortably exceeding market expectations of 54.6. The reading marked the sector’s second-fastest pace of expansion in nearly four years, driven primarily by stronger output growth, with the Production Index rising to 59.0 from 56.7. New orders also expanded at a slightly faster pace (55.5 from 55.3), while employment growth moderated marginally (52.4 from 52.7). Meanwhile, the Supplier Deliveries and Inventories indexes increased by 0.1 and 2.8 points to 59.1 and 51.4, respectively. The Prices Index, however, declined to 75.2 from 77.9, although it remained elevated. Overall, the survey suggests that strong demand in AI, data centers, semiconductors and infrastructure continues to support activity in several industries. However, persistent inflation, tariff uncertainty, supply constraints and cautious customer spending are weighing on broader business conditions and investment decisions.

The ISM Manufacturing PMI edged down to 54.5 in September 2026 from 54.6 in August, compared to forecasts of 55. Still, the reading continued to point to robust growth in the manufacturing sector, with new orders (55.3 vs 53.7) and employment (52.7 vs 51.2) rising at a faster pace while production slowed slightly (56.7 vs 58.3). Meanwhile, the Supplier Deliveries Index indicated slowing performance for the 10th month (59 vs 59.3), inventories contracted (48.6 vs 50.6) and backlog of orders rose faster (56.4 vs 51.8). Price pressures surged (77.9 vs 71.1), driven by increases in steel and aluminum, tariffs applied to many imported goods and increases in petroleum-based products as a result of the Middle East conflict. "40% of the comments were positive and 60% were negative. Among negative comments, pricing volatility was mentioned in 46%, tariffs 34%, the Iran war 30% and increasing lead times 21%", according to Susan Spence, Chair of the ISM Manufacturing Business Survey Committee.

The ISM Manufacturing PMI fell to 54.6 in August 2026 from July’s near four-year high of 55.6, below market expectations of 55.2. The reading nevertheless marked the eighth consecutive month of expansion in manufacturing activity, although growth moderated as new orders slowed sharply to 53.7 from 56.7. Production growth was broadly stable at 58.3, compared with 58.5 in July, while employment growth eased to 51.2 from 52.8, pointing to a softer pace of job creation in the sector. Meanwhile, manufacturers continued to highlight rising costs, supply-chain disruptions and heightened uncertainty, with tariffs and the Middle East conflict adding further pressure. The Prices Index remained elevated at 71.1, while the Supplier Deliveries Index rose to 59.3, signaling continued supply-chain delays. The Backlog of Orders Index fell sharply to 51.8, while the Imports Index declined to 52.5, suggesting weaker order pipelines and import activity.