The headline manufacturing PMI edged down 0.1 point to 54.5 in September, but remained in expansion for a ninth consecutive month. ISM indicated that the reading was consistent with annualized real GDP growth of 2.4%.
The September release points to firmer demand beneath the stable headline. New orders rose 1.6 points to 55.3 and backlogs jumped 4.6 points to 56.4, while customer inventories fell 1.2 points to 41.6. The current level is low by historical standards and suggests some pick-up in future production.
Output eased from August, with the production index down 1.6 points to 56.7. However, it has remained in expansion for 11 consecutive months, though respondents’ positive-to-negative commentary deteriorated further.
Employment rose 1.5 points to 52.7 and remained in expansion for a third month. However, only two of the six largest industries reported higher employment, suggesting the gains were not broad-based.
Price pressures intensified sharply. The prices index surged 6.8 points to 77.9—the report’s largest monthly move and near its level at the start of the Iran war—as steel and aluminum tariffs and petroleum-related costs rose across all six major industries.
Respondents highlighted strong demand alongside capacity and cost pressures, noting that “order levels remain strong and elevated.” But price pressures on both input costs and trade are a source of concern. One noted that “the U.S. tariff schedule is providing challenges,” while another commented that “higher steel costs each month increase our raw-material and finished-goods costs.”
Key Implications
The manufacturing expansion remains intact but did not accelerate in September. Stronger orders and backlogs, firmer employment and low customer inventories should support near-term production, but softer output growth, trade flows and respondent sentiment temper the signal.
The sharp jump in prices is the clearest concern. Tariffs, metals costs, energy disruption and constrained supply are keeping goods inflation elevated, complicating the inflation outlook and limiting the scope for rate cuts.
