Calendar › ISM manufacturing PMI › 2026-11-02
ISM Manufacturing 55.5 vs 54.6 Est — Production Highest Since 2021, Prices Ease to 75.2
Fundamentals · 2026-11-02
Manufacturing PMI 55.5 in October vs 54.6 est, +1.0 from September's 54.5, a 10th straight month of expansion and the highest since July's 55.6; Prices 75.2 vs 77.0 est, −2.7 points from 77.9, a 25th month of rising costs; 53.1% of firms paid more, down from 58.6%; Production +2.3 to 59.0, the highest since November 2021; New Orders +0.2 to 55.5; Inventories +2.8 to 51.4, back in expansion; Employment −0.3 to 52.4; Backlog −1.8 to 54.6; Supplier Deliveries 59.1, slowing for an 11th month; all five PMI components above 50, one more than in September; 20 commodities up in price, two down; sentiment worse for a third month (34% positive, 66% negative); 6% of manufacturing GDP contracting vs 2%; ISM maps the headline to 2.7% annualized real growth.
What It Changes
- Activity beat and the cost gauge cooled, the friendlier mix for the rate path. 55.5 is 0.9 above consensus, and the Prices Index fell 2.7 points to 75.2, 1.8 under a 77.0 estimate.
- 75.2 is still hot. It is a 25th straight month of rising input costs, 16 of 18 industries paid more and none paid less. It eases the September spike; it does not undo it.
- Production is doing the lifting. Output jumped to 59.0, its best since November 2021, and Inventories swung back above 50. New Orders barely moved, Backlog fell and Employment slipped.
- The people behind the numbers are gloomier, not happier. Two negative comments for every positive one, a third straight month of worse sentiment, and lead-time complaints doubled to 41% of negative comments.
Impact
- USD — Mixed, lean bullish — a 0.9-point beat on activity supports the hike case the Fed left open last week, while a softer prices print takes away some of the inflation argument.
- The beat is in output and stock-building rather than demand, and the cost gauge is still above 75, so neither leg is strong enough to settle December on its own.
- US Indices (ES / NQ / YM / RTY) — Mixed — production at a five-year high and AI-linked demand still flooding orders books against margins squeezed by 25 months of rising input costs.
- NQ has the most direct read-through. Computer & Electronic Products reported higher orders, output and hiring again, and the short-supply list is now led by electronic components (20 months), memory (10) and integrated circuits (new).
- YM carries the cost side. Steel and aluminum again drive the Prices Index, and freight, diesel and fuel are all on the up list.
- Gold (GC) — Mixed — a softer prices gauge works against Friday's hike-driven selling, a stronger headline works for it; the real-yield channel nets out close to flat on the release alone.
- 6C — Slight bearish — Canadian tariffs came up in two of the ten published respondent comments, one in Fabricated Metal Products and one in Primary Metals, both describing damage to cross-border trade.
Inside The Number
The Manufacturing PMI registered 55.5 in October, 1.0 point above September's 54.5 and 0.9 above a 54.6 consensus (TradingEconomics). It is a 10th straight month of expansion after ten months of contraction, the highest reading since July's 55.6, and the second-highest of the last 12 months. ISM maps it to 2.7% annualized real GDP growth, up from 2.4%.
The Prices Index is the number the market came for, and it cooled. It registered 75.2, down 2.7 points from 77.9 and 1.8 below a 77.0 estimate (TradingEconomics). The share of firms paying more fell to 53.1% from 58.6%, the share paying less stayed at 2.8%, and the net reading eased from +55.8 to +50.3. That reverses about 40% of September's 6.8-point jump. Spence's three drivers are unchanged from September: steel and aluminum prices that hit the whole value chain, tariffs on imported goods, and petroleum-based products tied to the Middle East conflict.
The commodity list narrowed but did not turn. Twenty commodities were reported up in price and two down (aluminum, which appears on both lists, and polypropylene resin), against 24 up and none down in September. Aluminum has now been on the up list for 35 straight months, copper 16, steel 12, steel products 11, hot-rolled steel and electronic components 10 each. Diesel fuel is up for a third month, and freight and fuel for an eighth. New to the list: energy, methanol, paper products and tungsten.
Production is the hidden headline. The Production Index jumped 2.3 points to 59.0, ISM's highest since 60.5 in November 2021. 27.6% of firms raised output against 11.5% that cut it, a net of +16.1, up from +13.5. The comment ratio on output improved to 2-to-1 from 1.6-to-1. Eleven industries grew production; three shrank.
Demand did not keep pace. New Orders rose only 0.2 to 55.5, and the net reading actually slipped to +7.3 from +7.9, with more firms reporting lower orders (16.9% against 15.5%). Backlog of Orders fell 1.8 to 54.6 after September's 4.6-point jump. Customers' Inventories held at 41.6, still "too low", which ISM reads as positive for future output. Factories are working through backlog and building stock faster than new business is arriving.
The headline move decomposes almost entirely into output and stocks. Each of the five components carries a one-fifth weight. Inventories added +0.56 and Production +0.46; New Orders added +0.04, Supplier Deliveries +0.02, and Employment took away −0.06. That is +1.02, which rounds to the published +1.0. With Inventories back over the line, all five components sit above 50. Strip out the inverted Supplier Deliveries Index at 59.1 and the other four average 54.6, about a point under the published 55.5.
Employment fell on the index and rose underneath it. The Employment Index slipped 0.3 to 52.4, but the raw response distribution improved: 14.4% hired against 10.8% cut, a net of +3.6 against +0.8 in September, with 74.8% reporting no change. The gap is seasonal adjustment, which applies to Employment and not to the raw shares. 52.4 is a fourth month above ISM's 50.3 threshold for consistency with rising BLS manufacturing payrolls. Eight industries added staff and five cut.
Sentiment worsened for a third month. 34% of comments were positive and 66% negative, a 1-to-2 ratio, against 40/60 in September and 42/58 in August. Among negative comments, pricing volatility was cited in 62% (46% in September), longer lead times 41% (21%), tariffs 25% (34%) and the Iran war 21% (30%). Lead-time complaints doubled in a month, which squares with the short-supply list and the buying-policy data: average lead time for production materials rose three days to 87.
Breadth slipped. 6% of manufacturing GDP was contracting in October, against 2% in September, and all of it was in strong contraction (a PMI of 45 or lower). Five of the six largest industries expanded. Twelve of 18 industries grew, the same count as September, with Printing, Paper Products and Nonmetallic Mineral Products contracting.
Exports look better on the index than in the industry count. New Export Orders rose 0.3 to 51.2, but only two industries (Chemical Products and Transportation Equipment) reported higher export orders against nine reporting lower. The export comment ratio was 1-to-1.3 negative. Imports rose 1.9 to 52.9.
Against the running story. The Fed held at 3.75%-4.00% on 28 October with two dissents for a hike and left December open. September's 77.9 was the strongest goods-inflation signal in that month's data; October's 75.2 takes some of that away. But Friday's Chicago PMI had prices paid at their highest since December 2021, and S&P Global's final PMI this morning had selling prices rising at their fastest since September 2022. ISM's cost gauge eased; the other two did not.
The Internals
Manufacturing at a glance, October 2026. The first six rows are the headline and the five subindexes that compose it:
Index · Oct 2026 · Sep 2026 · Change · Direction · Rate of change · Months in trend
Manufacturing PMI · 55.5 · 54.5 · +1.0 · Growing · Faster · 10
New Orders · 55.5 · 55.3 · +0.2 · Growing · Faster · 10
Production · 59.0 · 56.7 · +2.3 · Growing · Faster · 12
Employment · 52.4 · 52.7 · −0.3 · Growing · Slower · 4
Supplier Deliveries · 59.1 · 59.0 · +0.1 · Slowing · Faster · 11
Inventories · 51.4 · 48.6 · +2.8 · Growing · From contracting · 1
Customers' Inventories · 41.6 · 41.6 · 0.0 · Too low · Same · 25
Prices · 75.2 · 77.9 · −2.7 · Increasing · Slower · 25
Backlog of Orders · 54.6 · 56.4 · −1.8 · Growing · Slower · 10
New Export Orders · 51.2 · 50.9 · +0.3 · Growing · Faster · 4
Imports · 52.9 · 51.0 · +1.9 · Growing · Faster · 9
Against consensus (TradingEconomics):
Index · Actual · Consensus · Surprise
Manufacturing PMI · 55.5 · 54.6 · +0.9
Prices · 75.2 · 77.0 · −1.8
How the headline moved, by component (each carries a one-fifth weight):
Component · Change · Contribution to headline
Inventories · +2.8 · +0.56
Production · +2.3 · +0.46
New Orders · +0.2 · +0.04
Supplier Deliveries · +0.1 · +0.02
Employment · −0.3 · −0.06
Total · n/a · +1.02
Response distributions, October against September:
Index · % Higher Oct · % Lower Oct · Net Oct · Net Sep
New Orders · 24.2 · 16.9 · +7.3 · +7.9
Production · 27.6 · 11.5 · +16.1 · +13.5
Employment · 14.4 · 10.8 · +3.6 · +0.8
Inventories · 14.6 · 13.3 · +1.3 · −1.6
Prices · 53.1 · 2.8 · +50.3 · +55.8
Backlog of Orders · 23.7 · 14.6 · +9.1 · +12.8
New Export Orders · 10.3 · 8.0 · +2.3 · +1.8
Imports · 13.8 · 8.0 · +5.8 · +1.9
The Prices Index, last four months:
Month · % Higher · % Same · % Lower · Index
Oct 2026 · 53.1 · 44.1 · 2.8 · 75.2
Sep 2026 · 58.6 · 38.6 · 2.8 · 77.9
Aug 2026 · 46.2 · 49.8 · 4.0 · 71.1
Jul 2026 · 50.2 · 41.7 · 8.1 · 71.1
Average commitment lead times (days):
Category · Oct 2026 · Sep 2026 · Change
Capital expenditures · 175 · 176 · −1
Production materials · 87 · 84 · +3
MRO supplies · 46 · 49 · −3
Commodities in short supply, with consecutive months listed:
Commodity · Months
Electronic components · 20
Electrical components · 16
Memory · 10
Copper · 4
Printed circuit boards · 4
Steel · 4
Aluminum products · 2
Integrated circuits · new
What The Firms Actually Said
Costs, in the respondents' own accounting. A Chemical Products buyer who normally budgets for 2% to 3% annual inflation reported costs up more than 6% this year, with 24 tracked items higher against nine lower. A Food, Beverage & Tobacco respondent said diesel rates and the trucker shortage have pushed costs beyond raw materials to levels they had never seen.
The AI and defence crunch. A Machinery respondent described explosive growth in semiconductors and government and defence work that has overwhelmed both their plant and their suppliers: prices on one item doubled in six months, and on lead times, "four weeks is now 50 weeks". A Miscellaneous Manufacturing respondent said anything consumed by AI and data centres is short in both supply and price, and that rolling up next year's tariff, AI-commodity and geopolitical cost increases for the budget was sobering. Another Machinery respondent said business is strong on data centres, mission-critical infrastructure, municipal water replacement and mining.
Where demand is soft. A Transportation Equipment respondent said customers are in wait-and-see mode, balk at equipment quotes, and that the usual fourth-quarter budget-flush bump has not arrived this year. A second Transportation Equipment respondent described softer freight demand, falling truck tonnage and new-vehicle sales, with diesel surcharges propping up carrier revenue. A Computer & Electronic Products respondent said demand for scientific instruments has slowed on geopolitical uncertainty and the midterms' possible impact on research funding.
Policy and Canada. A Fabricated Metal Products respondent said Washington's policies keep customers to the shortest commitments and that Canadian tariffs keep hurting small US firms selling there. A Primary Metals respondent cited material shortages, high fuel, an election-year effect and Canadian tariffs weighing on steel.
Industry breadth. Growing in October, in order: Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Machinery; Computer & Electronic Products; Textile Mills; Primary Metals; Transportation Equipment; Fabricated Metal Products; Furniture; Chemical Products; Miscellaneous Manufacturing; and Food, Beverage & Tobacco Products. Contracting: Printing & Related Support Activities, Paper Products and Nonmetallic Mineral Products.
Against This Morning's Open
- The Open called ISM at 10:00 the only print likely to move anything and said the prices component mattered more than the headline, because 77.9 fed the December hike pricing that weighed on gold Friday.
- It set the test as softer prices easing that pressure and higher prices adding to it. Prices came in at 75.2 against a 77.0 consensus, so the read resolved on the softer side, while the headline beat by 0.9 in the other direction.
What This Sets Up
- Next print: November ISM Manufacturing, Tuesday 1 December, 10:00 ET. The two numbers to watch are the Prices Index and New Orders.
- A second monthly fall in Prices, below 75, with fewer than half of firms paying more, would say September's 77.9 was the peak of this leg. A move back toward 78 would put it level with March's war-start reading and undo today's relief.
- New Orders has to catch up with Production. A production surge on flat orders and falling backlog is stock-building, and it fades unless orders follow.
What Is This?
- What it is: The Institute for Supply Management's monthly Manufacturing PMI, built from a survey of purchasing and supply executives across 18 industries, weighted by each industry's share of GDP. The headline is an equal-weighted average of five diffusion indexes: New Orders, Production, Employment, Supplier Deliveries (inverted) and Inventories. Prices, Backlog, Customers' Inventories, New Export Orders and Imports are published alongside but not in the headline.
- Why it matters: It is the first broad read on the goods economy each month, and its Prices Index is the earliest monthly signal of input-cost inflation. With the Fed holding at 3.75%-4.00% and two members already voting for a hike, the Prices Index carries as much weight as the headline.
- How to read it: Each index is the share reporting higher plus half the share reporting no change. Above 50 means expansion on the month; ISM puts the overall-economy break-even at 47.5. Supplier Deliveries is inverted, so slower deliveries push the headline up. New Orders, Production, Employment and Inventories are seasonally adjusted; the other indexes are not, so their response shares and index readings line up exactly.
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_For informational purposes only. Not investment advice._