By Olivia ParkerUnited States manufacturing activity gained further momentum in October 2026 as accelerating production and steady new orders lifted key industry gauges deeper into expansion territory. Even so, factory operators continued to navigate persistent supply chain bottlenecks and a twenty-fifth consecutive monthly increase in raw material costs driven by tariffs, metals, and fuel.
The Institute for Supply Management reported on November 2, 2026, that its Manufacturing Purchasing Managers’ Index rose to 55.5% in October, up 1.0 percentage point from 54.5% in September. This reading marks ten consecutive months of industrial expansion following a ten-month contraction and corresponds to an annualized real gross domestic product increase of 2.7%. Meanwhile, the seasonally adjusted final S&P Global U.S. Manufacturing PMI registered 54.9 in October, easing slightly from September’s 55.9 but remaining above the 50.0 threshold for a fifteenth straight month.
Production Surges to Multi-Year High on Steady Orders
Factory output expanded sharply during October as the ISM Production Index climbed 2.3 percentage points from September’s 56.7% to reach 59.0%. That figure represents the twelfth consecutive month of output growth and the highest reading since November 2021, when the index stood at 60.5%. Demand also strengthened as the New Orders Index edged up 0.2 percentage points to 55.5%, extending its growth streak to ten months.
Across the broader Business landscape, artificial intelligence infrastructure, semiconductor fabrication, and defense procurement served as primary engines of factory demand. Although the ISM Backlog of Orders Index slipped 1.8 percentage points to 54.6% from 56.4% in September, backlogs still expanded for a tenth consecutive month. In parallel, the S&P Global survey recorded a seventeenth straight monthly rise in production alongside the first fractional increase in new export orders since June 2025.
Hiring and Inventories Expand Across Factory Sectors
To keep pace with workloads, industrial employers expanded payrolls for a fourth consecutive month under the ISM survey, with the Employment Index at 52.4% versus 52.7% in September. Surveyed managers favored hiring over headcount reductions by a 1.8-to-1 ratio across eight expanding industries led by machinery, transportation equipment, electronics, and food products. S&P Global data similarly highlighted a strong hiring push, noting that factory payroll growth reached its steepest pace in five and a half years.
Raw material stockpiles also returned to growth after contracting the prior month, with the ISM Inventories Index jumping 2.8 percentage points from 48.6% to 51.4%. Manufacturers stepped up purchasing to buffer operations against logistics bottlenecks, as the Supplier Deliveries Index ticked up to 59.1% from 59.0%, signaling slower deliveries for an eleventh straight month. Average vendor lead times lengthened to their greatest extent since mid-2022 amid shipping disruptions and component shortages.
Tariffs and Commodity Costs Drive 25-Month Price Streak
Despite operational gains, cost inflation remained elevated across the factory floor as the ISM Prices Index registered 75.2% in October, down 2.7 percentage points from 77.9% in September. The reading confirmed that raw material prices rose for a twenty-fifth consecutive month, with 53.1% of surveyed executives reporting higher input costs across five of the six largest manufacturing sectors.
Three structural forces drove upstream price inflation: rising steel and aluminum prices across the value chain, import tariffs on industrial goods, and higher petroleum-based fuel costs linked to Middle East conflict. Faced with rising vendor charges and energy bills, manufacturers in the S&P Global survey raised their factory gate selling prices at the fastest rate since September 2022. Economists note that while customer demand remains resilient enough to absorb higher charges, sustained factory gate inflation could keep upward pressure on consumer prices and interest rates.
