Economic activity in the U.S. manufacturing sector continued to expand in September, marking a ninth consecutive month of growth, although manufacturers remain increasingly concerned about inflation, tariffs and broader economic uncertainty.
The Institute for Supply Management’s latest Purchasing Managers’ Index (PMI) registered 54.5% in September, down 0.1 percentage point from August. A reading below 50% indicates contraction. ISM said the overall U.S. economy has now expanded for 23 consecutive months.
The S&P Global U.S. Manufacturing PMI showed stronger momentum, reaching 55.9 in September, two points higher than its August reading.
Despite the continued expansion, Susan Spence, chair of the ISM Manufacturing Business Survey Committee, said inflation and geopolitical instability remain significant concerns for manufacturers.
“The most recent surge in price growth has renewed my concern about price volatility,” Spence said during a media call Thursday. “Trade wars, chaos, whatever you care to call it, is really what’s affecting inflation.”
Five of the six largest manufacturing industries computer and electronic products; food, beverage and tobacco products; transportation equipment; machinery; and chemical products expanded during September.
New orders and production remain in expansion
ISM’s New Orders Index expanded for a ninth consecutive month after spending four consecutive months in contraction. The index reached 55.3%, an increase of 1.6 percentage points from August.
The Production Index also remained in expansion, although it weakened during the month. Its September reading was 56.7%, down 1.6 percentage points from August.
The Prices Index showed one of the sharpest changes. It climbed to 77.9%, a “notable increase” of 6.8 percentage points from August’s 71.1% reading, according to Spence.
Meanwhile, the Backlog of Orders Index rose to 56.4%, up 4.6 percentage points from 51.8% in August.
Employment also improved. The Employment Index reached 52.7%, compared with 51.2% in August, an increase of 1.5 percentage points. The manufacturing sector had added 16,000 jobs in August.
Supplier performance continued to slow for a 10th consecutive month following one month in “faster” territory. The Supplier Deliveries Index came in at 59%, down slightly from 59.3% in August. Unlike the other ISM PMI indicators, a reading above 50% for Supplier Deliveries indicates slower deliveries.
Inventories and trade indicators weaken
The Inventories Index fell two percentage points in September to 48.6%.
The Customers’ Inventories Index also declined, reaching 41.6%, compared with 42.8% in August. The index therefore remained in “too low” territory while contracting at a faster rate. ISM generally considers a “too low” customer inventory reading supportive of future production.
Trade-related indicators were less positive. The New Export Orders Index dropped 2.3 percentage points to 50.9%, compared with 53.2% in August.
The Imports Index also declined, falling 1.5 percentage points to 51%, from 52.5% the previous month.
Overall, three of ISM’s four demand indicators New Orders, Backlog of Orders and New Export Orders remained in expansion. At the same time, customer inventories continued to be classified as “too low.”
Spence noted that new orders have followed an uneven pattern since June, rising one month and falling the next. Employment has shown a similar pattern, she said, describing the movement as “not steady in either direction.”
Manufacturers point to tariffs and geopolitical risks
The September survey also highlighted a significant deterioration in sentiment among manufacturers.
According to Spence, 40% of comments submitted to ISM were positive, while 60% were negative. The ratio of positive to negative sentiment stood at 1 to 1.6.
Among the negative comments, pricing volatility was mentioned in 46%, tariffs in 34%, the Iran war in 30% and increasing lead times in 21%. Most respondents cited more than one factor.
Spence said sentiment was particularly concerning around tariffs imposed by the Trump administration on Canada and the retaliatory tariffs introduced by Canada.
Manufacturers surveyed by ISM also pointed to the war in Iran and broader economic and geopolitical uncertainty as factors affecting their businesses.
One respondent from the computer and electronic products industry said the U.S. tariff schedule was creating challenges. The manufacturer also cited efforts to find alternative sources of supply outside China, local opposition to U.S. data centers and continued shortages of materials and components.
A machinery-industry respondent reported that orders had increased despite the difficulties created by tariffs. However, the company said delivery times had also doubled in the semiconductor, electronics and government sectors, while other sectors remained flat or declined.
The manufacturer said supply chain lead times and pricing pressures had contributed to an almost doubling of its factory backlog. Canada’s tariffs had also increased cross-border costs and forced the company’s supply chain team to reassess sourcing arrangements that had taken years to develop.
A transportation equipment manufacturer similarly described tariffs and uncertainty as growing obstacles.
The respondent said new challenges were emerging each month, with the trade dispute with Canada contributing to higher prices and significant disruption. Customers were increasingly delaying capital expenditure decisions while waiting for greater certainty around costs and demand.
For manufacturers, September therefore delivered a mixed picture: production, orders and employment remained in expansion, but price pressures, trade disruptions, supply chain constraints and geopolitical uncertainty continued to make planning more difficult.
