News & Insights

In September, the U.S. manufacturing sector contracted for the seventh consecutive month but at a slower pace than the prior month, with the ISM Manufacturing^® PMI increasing to 49.1% from 48.7% in August. One of the four demand indicators improved in September, with the Backlog of Orders Index rising 1.5 percentage points to 46.2%. Meanwhile, the New Orders, New Export Orders and Customers’ Inventories Indexes contracted at faster rates. On the other hand, the Employment Index (45.3%) declined at a slower pace, while the Production Index returned to growth after contracting in August, increasing from 47.8% to 51%.

The New Orders Index contracted after one month of expansion, falling 2.5 percentage points from August. The index hasn’t shown consistent growth since a 24-month streak of expansion ended in May 2022. Of the six-largest manufacturing sectors, none reported an increase in new orders. Respondents continued to note concern about near-term demand, primarily driven by tariff costs and uncertainty.

The New Export Orders Index contracted for the seventh consecutive month at a faster pace, 4.6 percentage points lower than August. The continued contraction is likely indicative of dampened demand amid ongoing trade tensions and policy uncertainty. Meanwhile, the Imports Index contracted for the sixth consecutive month and at a faster rate, down 1.3 percentage points to 44.7% in September. Imports continued to contract as tariff pricing results in lower demand compared to prior months.

The Employment Index contracted for the eighth consecutive month but at a slower pace than the prior month, up 1.5 percentage points from August to 45.3%. Of the six-largest manufacturing sectors, none reported increased employment. Companies continued to focus on layoffs and attrition to restrict headcounts due to uncertainty around near- to mid-term demand. For every comment on hiring, three respondents noted reduced headcounts.

The Prices Index decreased 1.8 percentage points to 61.9%, indicating raw materials prices grew for the 12th straight month in September, but at a slower pace. Of the six-largest manufacturing sectors, all reported increased prices, led by machinery. The increase continues to be driven by steel and aluminum price increases impacting the entire supply chain, as well as the tariffs applied to most imported goods. Roughly 32.5% of companies reported paying higher prices, slightly down from 33.5% in August but still up dramatically from 21% in January.