US Manufacturing Expands for Ninth Month, but Price Pressures Spike to 77.9

Key points

• The ISM Manufacturing PMI fell slightly to 54.5 in September from 54.6 in August, missing the consensus estimate of 55.0 but remaining well above the 50.0 expansion threshold.
• The Prices Index jumped 6.8 percentage points to 77.9, returning to levels seen at the start of the Iran war, indicating sharp increases in input costs.
• New Orders expanded for the ninth straight month to 55.3, and Employment rose to 52.7, marking the third consecutive month of growth in hiring.
• Production slowed slightly to 56.7, while the Inventories Index dropped to 48.6, entering contraction territory for the first time in several months.
• The overall economy continued to expand for the 23rd consecutive month, with the manufacturing PMI corresponding to a 2.4% annualized GDP increase.

Background

This report follows a period of sustained manufacturing expansion that began in early 2026 after a ten-month contraction. Previous data indicated strong demand and rising payrolls, but concerns over trade policy and energy costs have persisted. The current surge in prices contrasts with earlier periods of more moderate inflation, reflecting new geopolitical and tariff-related pressures.

How outlets are covering it

Outlets highlight different aspects of the report. PR Newswire and ISM emphasize the continued expansion and growth in new orders and employment, framing the data as a sign of economic resilience. MarketWatch focuses on the negative sentiment, noting that 60% of comments were negative, with executives citing tariffs, the Iran war, and pricing volatility as major headwinds. Kitco highlights the spike in the Prices Index and its impact on gold prices, which fell to $4,158/oz, while noting that bond yields remain high despite softer inflation data. ZeroHedge notes that the S&P Global final PMI was the strongest since May 2022, attributing the strength partly to AI spending, while ISM data showed a slight dip in the headline number.

Why it matters

The sharp rise in the Prices Index to 77.9 suggests that inflationary pressures are re-emerging, which could influence Federal Reserve policy decisions. Fed Vice Chair Jefferson recently signaled patience on rate cuts, noting that inflation remains above target with upside risks. The combination of strong manufacturing expansion and rising costs creates a complex environment for monetary policy, as the Fed must balance supporting growth with controlling inflation. Additionally, the negative sentiment among manufacturers regarding tariffs and energy costs indicates that future growth may be constrained by these external factors.

What to watch

Market participants will closely watch the impact of the rising Prices Index on future inflation data and Federal Reserve decisions. The next ISM Manufacturing PMI report will provide further insight into whether the current expansion can sustain momentum or if cost pressures will lead to a slowdown. Additionally, the reaction of gold and bond markets to the data will indicate investor expectations for future inflation and interest rates.