September ISM manufacturing gauge registers 54.5, trails 55.0 consensus

• The prior month’s reading was 54.6.
• New orders measured 55.3, compared with 53.7 previously.
• The employment index was 52.7, up from 51.2 in the prior report.
• Prices paid hit 77.9, the highest since May, above the 72.3 expectation.
• The preceding prices paid figure was 71.1.

Market attention immediately focused on the prices paid component following its surge. Long-dated Treasury yields touched their daily highs, with the 30-year benchmark climbing 5.2 basis points to 5.69%. Stocks also felt pressure from this development.

Prices paid:

ISM also published the following remarks from survey respondents:

• “Better performance was driven primarily by temporary market effects, including (1) geopolitical uncertainties, (2) customers bringing forward purchases, (3) delayed raw material price increases and (4) reduced competitor capacity. However, these factors do not signal sustained recovery: Structural challenges facing the chemical industry remain, including overcapacity, persistent pricing pressures and protectionist trade policies.” [Chemical Products]
• “Supply chain performance has improved compared to prior years, with lead times largely normalized. Cost pressures persist in select raw materials, transportation and labor categories, requiring continued focus on supplier management and cost control. We remain cautiously optimistic about business conditions over the next several quarters.” [Chemical Products]
• “The U.S. tariff schedule is providing challenges. Finding alternate sources of supply outside of China, local pushback on data centers in the U.S. and continuing material/component shortages are affecting business.” [Computer & Electronic Products]
• “Manufacturing activity remains stable, with a continued focus on cost optimization, supplier negotiations and supply base consolidation. We are actively evaluating alternative sources in several categories to improve supply resilience and reduce costs. While material availability has generally improved compared to prior periods, qualification requirements and supplier capacity constraints continue to influence sourcing decisions for certain critical materials and components. Capital and operational spending remain focused on productivity, efficiency and transformation initiatives.” [Computer & Electronic Products]
• “Orders have doubled yet again, and delivery times have also doubled, in the semiconductor, electronics and government sectors, with remaining sectors flat to down. Coupled with supply chain lead times and pricing pressures, the factory backlog has nearly doubled. Canada tariffs have impacted cross-border costs and left our supply chain team scrambling — those supply chains took years to develop and nurture — hurting the very lead times government buyers are concerned about.” [Machinery]
• “Order levels remain strong and elevated; we have orders through year-end at above forecast levels. Our biggest challenge continues to be a severe shortage of workers, limiting our production output to meet demand. The second challenge is general availability of steel; the market is getting worse, and more production delays are expected as we gap out of needed material.” [Fabricated Metal Products]
• “Raw metals continue to be challenging, especially with the uncertain nature of tariffs being on and off again. New tariffs against Canada have drastically increased costs for capital expenses as well as assemblies.” [Electrical Equipment, Appliances & Components]
• “Fuel costs are still affecting transportation costs and the overall cost of goods. Beef costs remain high, with no relief in sight.” [Food, Beverage & Tobacco Products]
• “Higher interest rates slow down the growth of new construction projects; we also have to face up to the higher cost of components from overseas due to tariffs and freight rates. Due to booming demand of AI and data centers, domestic steel capacity has been stretched and pushed. Higher steel costs each month increase our raw-material and finished-goods costs.” [Machinery]
• “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.” [Transportation Equipment]

The ISM manufacturing PMI is based on the longest-running survey of its type and arrives as the headline US indicator each month. It is published at 10 am Eastern Time on the opening business day of the month. The Institute for Supply Management, a purchasing-profession trade body renamed from the National Association of Purchasing Management in 2001, conducts the survey. Data collection in the current format dates back to 1948, one of the lengthiest runs among economic gauges.

ISM’s method involves surveying purchasing and supply executives at hundreds of manufacturers. Respondents indicate if activity across several categories improved, worsened, or stayed the same. The results form diffusion indexes. A reading of 50 separates expansion from contraction. Values above 50 signal more improvement reports than declines, while values below 50 signal the reverse. Seasonal adjustments are applied.

The headline figure is a composite, equally weighting five sub-indexes: new orders, production, employment, supplier deliveries, and inventories. The supplier deliveries index is inverted, meaning lengthening delivery times boost the headline, on the logic that tight supply chains imply robust demand. This technicality has periodically burnished the PMI, famously during the pandemic.

Beyond the headline composite, ISM releases separate indexes for prices paid, order backlogs, new export orders, imports, and customers’ inventories. The prices paid sub-index garners particular attention as a gauge of goods inflation and frequently moves markets right after the headline number.

ISM supplements the quantitative data with anonymous remarks from participants, arranged by industry. These give a qualitative picture of downstream conditions across chemicals, transportation equipment, machinery and other sectors.

The Institute notes that PMI readings in the low 40s or above historically align with growth across the whole economy, underscoring that manufacturing accounts for a modest portion of American GDP. A rival gauge from S&P Global arrives earlier on the same day and routinely differs from ISM's numbers.