Dive Brief:
- U.S. manufacturing expanded in October for the 10th straight month, spurred by growth in new orders and production, the Institute for Supply Management said Monday, while noting that volatile prices eroded sentiment for a third consecutive month.
- ISM’s Manufacturing PMI index last month rose 1 percentage point from September to 55.5%, Susan Spence, chair of ISM’s manufacturing business survey committee, said in a statement. Four of five subindexes rose during the month — including supplier deliveries and inventories — while employment growth fell, she said.
- “General sentiment got worse,” Spence said, “with 34% of the comments positive and 66% negative.” Among the gloomy comments, “pricing volatility was mentioned in 62%, longer lead time 41%, tariffs 25% and the Iran war 21%,” she said, citing results of a survey of purchasing managers.
Dive Insight:
Robust manufacturing aligns with a revival in broad economic growth since August. Gross domestic product increased 3.4% during the third quarter and is likely to expand 3.7% during Q4, according to a Federal Reserve Bank of Atlanta forecast on Monday.
Yet the rebound in manufacturing appears concentrated in aerospace, computers and electronics, and a few other industries, Pantheon Chief U.S. Economist Samuel Tombs said Monday in a note.
“The AI-capex boom probably will continue to support output in tech-related sectors, but a broader manufacturing boom looks unlikely,” Tombs said, noting “fading of the boost from precautionary stockpiling linked to the Middle East conflict.”
“Higher borrowing costs will weigh on investment outside the AI sector, and weak real income growth points to slower increases in consumers’ spending,” he said, predicting manufacturing will slow next year.
Persistent inflation and disruption in supply chains prompted a slight slowing in manufacturing growth last month, S&P Global said Monday, differing from ISM’s report of accelerating growth.
The S&P Global U.S. Manufacturing Purchasing Managers’ Index registered 54.9 in October. While declining from 55.9 in September, the index has exceeded 50 — the level that marks expansion — for 15 straight months, S&P Global said.
“However, growing pains are clearly evident, with factories struggling to meet strong demand, especially for AI-related goods and equipment, amid supply chain disruptions,” S&P Global Market Intelligence Chief Business Economist Chris Williamson said.
“Delivery delays, often linked to shipping and logistics issues, are more widespread than at any time since 2022,” he said in a note.
Like the ISM, S&P Global flagged the challenge to manufacturers from stubborn price pressures caused by tariffs and soaring fuel prices.
“Manufacturers widely reported that energy, fuel and transportation expenses had risen since September, and were key in driving up wider vendor prices,” S&P Global said.
“Tariffs also added to upward cost pressure, and metals like aluminum and steel were again reported to have risen in price,” S&P Global said. “Faced with another atypical increase in input costs, many manufacturers saw little choice but to increase their own charges in October.”
