U.S. manufacturing activity continued to expand in October, extending the sector’s growth streak to 10 straight months. The latest figures from the Institute for Supply Management (ISM) reveal that industrial demand is getting better, with production at a five-year high. The results also are consistent with recent cautiously positive signals from large less-than-truckload (LTL) carriers.

The ISM Manufacturing Purchasing Managers’ Index (PMI) was 55.5 in October, according to the organization’s latest survey of manufacturing supply executives. The reading was a point higher than analysts’ expectations and also improved on September’s 54.5 figure.

If the PMI is higher than 50, this suggests an expansion, while a PMI below 50 indicates a contraction. A reading above 47.5 generally indicates economic growth, the ISM said. October’s result was consistent with annualized real GDP growth of 2.7%, compared to 2.4% in September.

New orders continue to support expansion in manufacturing

One of the strongest indicators in the report was the New Orders Index which rose to 55.5, its 10th month in expansion territory. The index was up 20 basis points from September, indicating that demand conditions continue to be supportive of future manufacturing activity.

Four of the six largest manufacturing sectors tracked by the ISM saw new orders rise: machinery, computer and electronic products, transportation equipment and chemical products.

Business sentiment on new orders also improved. In October, the ratio of positive comments to negative comments was 1.8 to 1, up from 1.7 to 1 in the previous month.

But the Backlog of Orders Index fell 1.8 point to 54.6, indicating a slight cooling in outstanding demand.

Production turned in a stronger showing. The index rose 2.3 points to 59, the highest level in five years, and showed the continued strength of manufacturing output.

Low customer inventories may support future production

Customer inventories in October remained below desired levels with the index unchanged at 41.6. The ISM still refers to these inventory levels as “too low.”

Low customer inventories are usually viewed as a positive sign of future production as companies may need to replenish stocks as demand continues, the group said.

Manufacturing jobs also continued their march upward. The Employment Index came in at 52.4, staying above the expansion threshold for a fourth straight month.

At the same time, supply chain conditions continued to come under pressure. The Supplier Deliveries Index increased 10 basis points to 59.1. This indicator tracks delivery times to manufacturing facilities, and has pointed to longer deliveries and supply chain constraints for 11 months in a row.

Note that the Supplier Deliveries Index is the only "inverted" component of the ISM manufacturing survey, with higher levels indicating slower supplier deliveries.

The major concerns are still inflation and uncertainty in trade

Cost pressures remain a major challenge for businesses, although manufacturing indicators are stronger.

The Prices Index stood at 75.2 in October. The reading was down 2.7 points from September but remained high, showing continued inflationary pressure on manufacturers.

Respondent sentiment also worsened overall. Positive comments accounted for 34% of responses, and negative comments accounted for 66%. That was an 800 basis-point deterioration from two months earlier.

The ISM report said respondents cited a number of concerns. Pricing volatility was mentioned in 62% of negative comments, followed by longer lead times at 41%, tariffs at 25% and the Iran war at 21%. Many respondents mentioned several of these factors at once.

LTL carriers see early signs of demand recovery

The October manufacturing numbers are of particular importance to the freight transportation industry. ISM data usually lead changes in less-than-truckload shipments by about three months, making the survey a useful indicator of freight volumes.

Cumulative year-over-year tonnage for publicly traded LTL carriers has already turned positive in March. More recently, a few operators said they saw modest demand improvement in their third-quarter earnings updates.

XPO (NYSE: XPO) said half of its customers expect higher demand in the first half of 2027 than in the second half of 2026. The company also pointed to pricing and operational initiatives that helped drive its third-quarter results.

Meanwhile, Old Dominion Freight Line (NASDAQ: ODFL) said more customers are seeking multiyear contracts as available truck capacity tightens. The carrier also said that 3PLs are increasingly interested in locking in longer-term capacity commitments.

The developments suggest freight customers may be positioning themselves for a more favorable demand environment, although the strength and timing of any recovery is uncertain.

LTL shares rise on latest figures

Manufacturing data was well received by financial markets. LTL transportation stocks rose more than 3% on average in early Monday trading while the S&P 500 climbed 0.6%.

The market is responding to increased optimism about industrial production and possibly increased freight volumes in the next few quarters.

For logistics providers, procurement teams and transportation planners, the ISM numbers provide important insight into where the manufacturing economy is headed. Higher output, growth in new orders and low customer inventories could underpin further freight activity.

However, supply chain operations continue to face headwinds from ongoing price volatility, longer delivery times, tariffs, and geopolitics.

The October PMI therefore indicates a strengthening manufacturing environment, but also that the rebound in freight demand will hinge on whether industrial growth can be maintained in the coming months.