ISM Manufacturing PMI Hits 55.5% in October, Extending Expansion Streak

US manufacturing expanded for the 10th consecutive month in October, with the ISM Manufacturing PMI (the Institute for Supply Management's principal gauge of factory activity) registering 55.5% — one full point above September's 54.5% and the fastest growth rate in the current streak. Any reading above 50% signals expansion; October's number points to growth accelerating rather than merely continuing.

The composition beneath the headline matters for supply planners. Four of the five subindexes that make up the PMI — new orders, production, supplier deliveries and inventories — grew faster than in September. Only employment lost momentum, easing by 0.3 percentage point.

"Of the five subindexes that make up the PMI, four (new orders, production, supplier deliveries and inventories) grew faster than the previous month, while employment growth slowed down by 0.3 percentage point," said Susan Spence, chair of the ISM's manufacturing business survey committee.

What drove the October reading?

The new orders index edged up 0.2 points to 55.5%, while the production index jumped 2.3 points to 59.0% — the strongest move in the report and the clearest signal that factories ran harder last month than in September. The employment index stayed in expansion territory but slipped 0.3 points to 52.4%, meaning hiring still grew, only at a slower pace.

Demand indicators told a consistent story. Three of four demand measures — new orders, backlog of orders and new export orders — remained in expansion. The customers' inventories index stayed in "too low" territory, contracting at the same rate as in September, a condition buyers typically read as a leading indicator of restocking demand.

"A 'too low' status for the customers' inventories index is usually considered positive for future production," Spence said.

Which sectors grew?

Twelve of the eighteen manufacturing industries tracked by ISM reported growth in October:

• Plastics & rubber products
• Electrical equipment, appliances & components
• Machinery
• Computer & electronic products
• Textile mills
• Primary metals
• Transportation equipment
• Fabricated metal products
• Furniture & related products
• Chemical products
• Miscellaneous manufacturing
• Food, beverage & tobacco products

Five of the six largest manufacturing industries — machinery; computer & electronic products; transportation equipment; chemical products; and food, beverage & tobacco products — expanded during the month, according to Spence. For automotive supply chains, the presence of transportation equipment, fabricated metals, primary metals and electrical equipment on the growth list covers most tiers of the value chain, from stamping to electronics content.

Why is sentiment souring while the index climbs?

The survey's qualitative side cuts against the numbers. Only 34% of respondent comments were positive and 66% were negative — the third consecutive month of deteriorating general sentiment, Spence reported. The gap between a rising PMI and worsening commentary suggests output growth is running against policy and cost headwinds rather than with them.

A respondent in fabricated metal products put the policy problem plainly: "Economic policies coming out of Washington continue to weigh on business conditions. Customers are unwilling to make commitments to anything other than the shortest term due to the vast uncertainty. Canadian tariffs continue to damage small U.S. businesses selling into that important market."

A second respondent, in miscellaneous manufacturing, described a squeeze centered on AI-driven commodity demand: "Any commodity consumed by AI/data centers is in a crunch, both for supply and pricing. We keep wondering when the madness will stop. In spite of these challenges, our demand remains strong and the supply chain is getting by, albeit with a lot of work."

That respondent flagged three cost lines weighing on next year's budget: remaining tariffs, AI-impacted commodity price increases, and price increases tied to geopolitically influenced commodities.

What to watch next

Watch the November PMI release to see whether the production index holds above 59% and whether the "too low" customers' inventories reading converts into a restocking-driven order surge. The employment index, now at 52.4%, is the softest component in an otherwise firm report; a slide below 50% would mark the first crack in the expansion. The trajectory of Washington's tariff policy, particularly toward Canada, remains the variable most cited by respondents as the constraint on long-term commitments.