ISM® PMI® Reports Roundup: September Manufacturing
From a data standpoint, the ISM® Manufacturing PMI® Report for September indicated a recovery after yellow flags emerged the previous month, with multiple key subindexes gaining back what they lost in August.
The Manufacturing PMI® held steady at 54.5 percent, down just 0.1 percentage point from the previous month, but a sizeable increase in the Prices Index will surely get the attention of the U.S. Federal Reserve (Fed) as it weighs another interest rate hike in October. And survey panelist sentiment — which this space has noted all year has regularly diverged from the data — was noteworthy pessimistic again.
U.S. manufacturing continued to expand in September, but inflation is flashing a red light. The ISM Manufacturing PMI held at 54.5, with stronger new orders and solid production. Surging prices paid reflect widespread cost pressures from the Iran war and tariffs.
— Mark Hamrick (@hamrickisms.bsky.social) October 1, 2026 at 8:14 AM
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“It’s really the concern that’s coming through, certainly in the comments,” Susan Spence, MBA, the Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee, told a conference call of reporters on Thursday. “We don’t know what tariff war is going to be next, and we have an another war (Iran) on our hands.
“And I think it’s just general nervousness about not being able to rely on a steady economic policy. When there are threats of high tariff levels, even when the administration may say it’s a negotiating tactic, there’s nervousness that creates uncertainty and a bit of chaos. That's why you’re seeing this sentiment, even though (the sector) has been in expansion.”
In September, 40 percent of comments were positive, 60 percent negative, with pricing volatility, tariffs and the Iran war the biggest reason for Business Survey Committee discontent. And sentiment in key areas has eroded in recent months.
For example: The Production Index reading of 56.7 percent in September is robust, by any standard. However, that figure is down 1.6 percentage points from the previous month, with a positive-to-negative comment ratio of 1.6-to-1, down from 3.3-to-1 in July.
“If it were 15 percent to 20 percent, even 30 percent or 40 percent, that would be one thing,” Spence said. “But 60 percent (of overall negative sentiment) is a big number. And that number has gone up, despite the (positive data).”
The median panelist in September might have been a respondent in Transportation Equipment, who commented, “Every month, we are faced with new headwinds created by this administration. This month, it is the trade war with Canada, which every day is getting worse — causing prices to go up and uncertainty that creates massive disruption. Buying continues to get pushed out indefinitely as customers don’t want to spend on capital expenditures until there is more certainty of costs and demand. The only thing that is predictable is the chaos that is created by these trade policies.”
Those dynamics were felt in the Prices Index reading of 77.9 percent, an increase of 6.8 percentage points and its highest level since May (82.1 percent). No commodities were reported as down in price, with 24 listed as up in price, matching the August total. Spence noted to reporters that 15 of the commodities up in price have been on that list for seven months or less — after the hostilities in Iran began.
Cost/costs mentioned 14 times in the comments section of the ISM Manufacturing PMI in September pic.twitter.com/9JsKHQErBQ
— Kevin Gordon (@KevRGordon) October 1, 2026
“The most recent surge in price growth has renewed my concern of price volatility choking off demand in some of these industries, underlining the impact of the ongoing war and renewed tariff threats,” Spence said. “The recent new order and backlog trend of up one month and down the next is not given confidence to a sustained and steady expansion, in my opinion.”
The good news: The New Orders (55.3 percent) and Backlog of Orders (56.4 percent) recovered all of the net 6.2 percentage points they lost in August. The Employment Index (52.7 percent) had its third consecutive reading in expansion territory and reversed nearly all of its previous month’s decrease.
Still, Spence said on ISM’s LinkedIn Live broadcast on Thursday that sustained employment growth isn’t likely until, as she put it, “there’s something behind it.” That means key demand indexes can’t yo-yo — while the New Orders and Backlog of Orders indexes have been in expansion, they have toggled up and down for five straight months.
The most positive impact on inflation would be “a settling down of trade wars — chaos, whatever you care to call it — and an end to the Iran war,” Spence said. “I believe the good news on employment is the (federal) initial jobless claims number continues to go down. So, if employment is okay and inflation is not, it’s harder to predict what the Fed is going to do.”
There’s no record of a Business Survey Committee calling the economy “annoying,” as was the case in August. But it remains interesting.
The ISM® PMI® Reports roundup:
Barron’s: U.S. Manufacturing Activity Expands for Ninth Month in a Row. “The U.S. manufacturing economy has grown for nine consecutive months, and growth is turning into more manufacturing jobs. Still, inflation, tariffs, and the war in Iran are impacting business sentiment. … It was another solid report, with a few watch items remaining for investors.”
Bloomberg: U.S. Manufacturing Expansion Continues Despite Mounting Costs. “The September report showed a healthy pipeline of demand. A measure of new orders picked up while a gauge of order backlogs rose to the highest since February. Production expanded, though at a slower pace. … The Iran war sent energy costs higher and snarled some shipping lanes, though renewed price and supply chain pressures haven’t derailed the sector.”
CNBC: ISM Manufacturing Index Steady, Though Prices Gauge Surges. “We did just get ISM Manufacturing (data), and it might be responsible for this little air pocket we hit in the market,” host Carl Quintanilla said. “It was 54.5 percent, we were looking for 55, but it’s really the (Prices Index) — prior 71 percent, looking for 73, we get 77.9 percent.”
Manufacturing Dive: Manufacturing Expands in September, But Uncertainty Weighs on Sentiment. “Many respondents (cited) tariffs, the war in Iran and general economic and geopolitical uncertainty as negatively impacting their businesses. A respondent in the machinery industry agreed that the tariffs are causing problems, even though the company’s orders are up.”
MarketWatch: U.S. Manufacturers Say Inflation is Bad and Not Getting Any Better. “A survey of top U.S. executives in September showed that inflation is the industry’s biggest problem. … ISM’s price barometer jumped in September to a four-month high after the resumption of hostilities between the U.S. and Iran. It has also returned to near a four-year peak.”
US ISM’S SPENCE TO REPORTERS: MANUFACTURING PURCHASERS' CONCERNS OVER PRICES COMING FROM HIGHER COSTS TRIGGERED BY PROLONGED IRAN WAR #ISM #manufacturing #inflation
— Mace News (@MaceNewsMacro) October 1, 2026
Reuters: U.S. Manufacturing Steady in September, Input Prices Increase. “An AI infrastructure buildout is supporting manufacturing as well as businesses rebuilding inventories to meet robust domestic demand. There are, however, concerns that segments not related to the AI spending boom could struggle in the months ahead amid headwinds from the U.S.-Israeli war with Iran, which has snarled supply chains and raised energy prices.”
The ISM® Services PMI® Report will be unveiled on Monday; the Roundup article and ISM’s LinkedIn Live broadcast will be presented on Tuesday. For the most up-to-date content on the ISM® PMI® Reports, use #ISMPMI on X, formerly known as Twitter.
(Photo credit: Getty Images/Fly View Productions)