Economic activity in the U.S. manufacturing sector has experienced only two months of expansion over the last three years, according to the latest data in the ISM Manufacturing PMI Report. The trend line contracted once again in October 2025, marking the eighth consecutive month of contraction, following a two-month expansion that preceded 26 straight months of contraction.
The ISM Manufacturing PMI Report was issued on November 4 by Susan Spence, MBA, chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee.
“The Manufacturing PMI registered 48.7 percent in October, a 0.4-percentage point decrease compared to the reading of 49.1 percent recorded in September,” assessed Spence. “The overall economy continued in expansion for the 66th month after one month of contraction in April 2020.”
To help interpret these numbers, it is important to note that a Manufacturing PMI above 42.3 percent, sustained over time, generally signals expansion for the broader economy.
- The New Orders Index contracted for the second month in October, following one month of growth; the figure of 49.4 percent is 0.5 percentage points higher than the 48.9 percent recorded in September.
- The Production Index (48.2 percent) for October was 2.8 percentage points lower than September’s figure of 51 percent.
- The Prices Index remained in expansion (or ‘increasing’ territory), registering 58 percent, down 3.9 percentage points compared to the reading of 61.9 percent reported in September.
- The Backlog of Orders Index registered 47.9 percent, up 1.7 percentage points compared to the 46.2 percent recorded in September.
- The Employment Index registered 46 percent, up 0.7 percentage points from September’s figure of 45.3 percent.
- The Inventories Index registered 45.8 percent, down 1.9 percentage points compared to September’s reading of 47.7 percent.
- The New Export Orders Index reading of 44.5 percent is 1.5 percentage points higher than the reading of 43 percent registered in September.
- The Imports Index registered 45.4 percent, 0.7 percentage points higher than September’s reading of 44.7 percent.
- The Supplier Deliveries Index reading of 54.2 percent for October is up 1.6 percentage points from the 52.6 percent recorded in September.
“The Supplier Deliveries Index indicated slower delivery performance for the third consecutive month after one month in ‘faster’ territory, which was preceded by seven consecutive months in ‘slower’ territory,” Spence suggested. Supplier Deliveries is the only ISM PMI Reports index that is inversed; a reading of above 50 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases.
Spence continued, “In October, U.S. manufacturing activity contracted at a faster rate, with contractions in production and inventories leading to the 0.4-percentage point decrease of the Manufacturing PMI. A chain reaction of one-month index improvements started with New Orders in August and flowed to Production in September. In October, it manifested in a 1.7-percentage point increase in the Backlog of Orders Index.”
Spence said these short gains have not appeared to translate into sustained growth for the sector, a reflection of continuing economic uncertainty.
“All four demand indicators (New Orders, New Export Orders, Backlog of Orders, and Customers’ Inventories indexes) improved, although they are still in contraction territory,” she said. “The Customers’ Inventories Index contracted at a slower rate.”
A ‘too low’ status for the Customers’ Inventories Index is usually considered positive for future production.
“Regarding output, production deteriorated, and employment contracted at a slower pace, as 67 percent of panelists indicated that managing head count is still the norm at their companies, as opposed to hiring,” Spence noted.
“Finally, inputs (defined as supplier deliveries, inventories, prices, and imports) are mixed, with the Supplier Deliveries Index indicating slower deliveries, the Inventories Index contracting at a faster rate, and the Prices Index continuing to indicate pricing increases, but at a slower rate. The Imports Index contracted at a slower pace,” she continued.
“Looking at the manufacturing economy, 58 percent of the sector’s gross domestic product (GDP) contracted in October, down from 67 percent in September; however, the percent of GDP in strong contraction (registering a composite PMI of 45 percent or lower) is at 41 percent, up 13 percent from September. The share of sector GDP with a PMI at or below 45 percent is a good metric to gauge overall manufacturing weakness. Of the six largest manufacturing industries, only two (Food, Beverage & Tobacco Products; and Transportation Equipment) expanded in October,” said Spence.
The six manufacturing industries reporting growth in October, listed in order, are:
- Primary Metals
- Food, Beverage & Tobacco Products
- Transportation Equipment; Plastics & Rubber Products
- Fabricated Metal Products
- Nonmetallic Mineral Products
The 12 industries reporting contraction in October, in the following order, are:
- Textile Mills
- Apparel, Leather & Allied Products
- Furniture & Related Products
- Paper Products
- Printing & Related Support Activities
- Wood Products
- Petroleum & Coal Products
- Electrical Equipment, Appliances and Components
- Chemical Products
- Machinery
- Miscellaneous Manufacturing
- Computer & Electronic Products
Commodities in Short Supply or Up/Down in Price
The number of consecutive months the commodity is listed is indicated after each item.
(* Indicates both up and down in price.)
- Commodities Up in Price
Aluminum (23); Brass; Copper (4); Copper Products (4); Electronic Components (2); Precious Metals; Steel — Stainless (8); Steel Products* (8); and Zinc. - Commodities Down in Price
Polypropylene Resin (2); Steel (3); Steel — Hot Rolled; Steel — Scrap; Steel Products*; and Transportation. - Commodities in Short Supply
Capital Equipment; Critical Minerals; Electrical Components (4); Electronic Components (8); Labor (2); and Rare Earth Magnets (2).
Commentary from the Front Line
- “Business continues to remain difficult, as customers are cancelling and reducing orders due to uncertainty in the global economic environment and regarding the ever-changing tariff landscape.” (Chemical Products)
- “Decrease in domestic demand for finished products has resulted in slower manufacturing and an increase in raw material inventory.” (Petroleum & Coal Products)
- “In general, business is really strained. Money is sitting tighter, and geopolitical changes add to the uncertainty/risk factor. Even medical fields are feeling the pressure.” (Miscellaneous Manufacturing)
- “Sales continue to underperform in our automotive OEM and industrial divisions. Our aerospace and automotive aftermarket are the only areas performing slightly above budget. This is the third consecutive month of lower-than-expected sales, and the outlook for the remainder of the year is not looking any better. Sales are expected to be slightly less than in 2024.” (Fabricated Metal Products)
- “Tariffs continue to be a large impact to our business. The products we import are not readily manufactured in the U.S., so attempts to reshore have been unsuccessful. Overall, prices on all products have gone up, some significantly. We are trying to keep up with the wild fluctuations and pass along what costs we can to our customers.” (Machinery)
- “The commercial vehicle (CV) market remains depressed as customers continue to delay vehicle purchases. Uncertainty in price and transportation demand remains the center of attention. U.S. trade policy and reciprocal actions by China in the form of export controls on rare earths and semiconductors, as well as ocean freight carrier restrictions, have once again caused a lot of stress in supply lines. The CV industry is now bracing for the next round of tariffs focused on commercial vehicles, scheduled to begin on November 1.” (Transportation Equipment)
- “The tariff trade war has negatively impacted agricultural export markets, driving down demand and price. This negatively impacts farmer revenue and the likelihood of farmers investing in new equipment.” (Machinery)
- “The unpredictability of the tariff situation continues to cause havoc and uncertainty on future pricing/cost. But even with the tariffs, the cost to import in many cases is still more attractive than sourcing within the U.S. Challenges with tariffs on production equipment necessary for internal production make it difficult to justify expansion of capacity.” (Computer & Electronic Products)
- “Volatility in some of our highly exposed commodity markets has tempered a bit, thanks to improved weather conditions and overall downward pressure on pricing. Tariffs continue to remain difficult to quantify, manage and deal with in general, since they continue to impact us day-to-day and our bottom line.” (Food, Beverage & Tobacco Products)
- “Wonder has turned to concern regarding how the tariff threats are affecting our business. Orders are down across most divisions, and we’ve lowered our financial expectations for 2025.” (Chemical Products)
To access the complete ISM Manufacturing PMI Report, go here.
Image courtesy Yintex
