The US ISM manufacturing PMI rose to 55.5 in October, exceeding the market's expected production growth rate and hit a new high in the past five years

The Zhitong Finance App learned that the pace of expansion of the US manufacturing industry accelerated in October, and production activity recorded the strongest growth in the past five years, indicating that the US manufacturing industry continues to recover after a long period of downturn. However, despite strong corporate production and order performance, manufacturers are still concerned about inflationary pressure, tight supply of raw materials, and geopolitical uncertainty.

According to data released by the American Institute for Supply Management (ISM) on Monday, the ISM Manufacturing Purchasing Managers' Index (PMI) rose 1 percentage point from September to 55.5 in October, the second highest level in more than four years, and the performance surpassed all predictions in media surveys other than one economist. The index above 50 means the manufacturing industry is expanding.

Judging from the sub-indicators, the manufacturing production index rose to the highest level since the end of 2021 in October, indicating a marked acceleration in factory production activity. The new orders index, which measures demand conditions, also rose to its highest level since July and continued to remain in the expansion range, reflecting that demand in the manufacturing industry is still steady.

At this point, the US ISM manufacturing PMI has been in the expansion range for 10 consecutive months, reversing the slump in the industry that had continued for about three years. Continued recovery in the manufacturing industry has also boosted corporate recruitment. According to the data, the number of people employed in US factories increased for the fourth month in a row in October, setting the longest continuous growth record since the beginning of 2022, indicating that companies are gradually expanding the scale of employment to meet growing production demand.

The strong performance of the US manufacturing industry is mainly due to economic growth, resilient consumer demand, and continued growth in corporate investment. According to previously released data, the US economy grew at the fastest rate in a year in the third quarter. Among them, corporate investment in data centers, artificial intelligence (AI) infrastructure, and industrial equipment became an important driving force.

Judging from industry performance, a total of 12 manufacturing industries achieved growth in October, including electrical equipment, machinery, and computer and electronics industries. In contrast, the three industries of printing, paper, and non-metallic mineral products have shrunk.

Notably, despite the strong overall data performance of the manufacturing industry, companies' views on the business environment have continued to deteriorate in recent months. ISM Manufacturing Business Research Committee Chairman Susan Spence said in a conference call with reporters that the main challenges facing manufacturers are still inflationary pressure and limited supply of raw materials, and the ongoing war with Iran and tariff trade disputes have further exacerbated these problems.

Company feedback shows that different industries are under varying degrees of cost pressure. A chemical industry interviewee said “negative, inflation, loss” are the three words that best describe the company's procurement situation in 2026. Despite good sales, cost pressures mean this won't be a particularly good year.

Interviewees from the computer and electronics industry pointed out that global demand for capital research instruments has slowed due to continued uncertainty in the Middle East, Eastern Europe and China markets. At the same time, the US midterm elections and research funding policy prospects have also influenced customers' purchasing decisions, prompting companies to pay more attention to using existing equipment rather than purchasing new products.

Companies in the metal products industry said that Washington's economic policies continue to affect the business environment, and customers are unwilling to make long-term procurement commitments due to high uncertainty. Furthermore, Canadian-related tariff measures also continue to impact small US businesses that sell products to the Canadian market.

The food, beverage and tobacco industry is facing multiple pressures such as fluctuating raw material prices, rising diesel costs, and a shortage of truck drivers, leading to further increases in transportation and procurement costs.

However, AI infrastructure construction still brings strong demand to some manufacturing companies. An interviewee in the machinery industry said that demand in the semiconductor and government defense sectors is growing rapidly, and companies are struggling to cope with the sudden increase in orders. “The demand wave we've been waiting for has finally arrived”, but the global supply chain is under pressure as a result, delivery cycles have been extended, prices have risen, and some products have even experienced supply delays similar to those during the pandemic.

Another machinery manufacturer said that demand for upgrading data centers, critical infrastructure, and municipal water supply facilities continues to drive business growth, and demand in the mining industry remains strong. Other manufacturers pointed out that all raw materials needed for AI and data center construction are facing tight supply and rising prices.

Feedback from these companies shows that although the AI investment boom is driving the growth of manufacturing production and orders, it has also exacerbated the imbalance between supply and demand for some raw materials and industrial products.

Meanwhile, the US manufacturing industry is still facing greater inflationary pressure. The inflation indicator favored by the Federal Reserve rose 3.6% year on year in September, significantly higher than the central bank's target level of 2%.

According to the ISM report, manufacturers were still facing higher raw material purchase prices and extended supplier delivery times in October. Although the manufacturing price index fell back to 75.2 from September, it is still higher than before the outbreak of the Middle East conflict, which means that the pressure on corporate costs has not been fundamentally eased.

Andrew Sacher, an economist at Bloomberg Economic Research, said that the US manufacturing industry entered the fourth quarter with a strong momentum that exceeded expectations, while inflationary pressure on the industry eased slightly. He pointed out that the October ISM report did not show that recent fluctuations in AI-related stocks were due to weakening activity in the real economy.

Overall, the US manufacturing performance in October showed that economic demand was still resilient. In particular, AI, data centers, and industrial investment continued to provide growth impetus for the manufacturing industry. However, high raw material prices, supply chain bottlenecks, and trade policy uncertainty may still limit further expansion of enterprises and cause inflationary pressure to continue for some time to come.