Factory Output Hits Highest Level Since 2021 as Manufacturing Grows for 10th Straight Month

American factory production climbed to its highest level in nearly five years in October as the manufacturing sector grew for a 10th straight month.

The Manufacturing PMI rose a full point to 55.5 from 54.5 in September, the Institute for Supply Management reported Monday. Any reading above 50 signals expansion.

The production index jumped 2.3 points to 59, the highest since November 2021. New orders edged up to 55.5, while employment slipped to 52.4 but stayed in growth territory.

All five components that feed the headline index were expanding, one more than in September, as manufacturers’ inventories returned to growth at 51.4. Customers’ inventories stayed low at 41.6, which typically supports future orders. Twelve industries reported growth, including machinery, primary metals and computer and electronic products.

Backlogs grew more slowly, with that index slipping 1.8 points to 54.6. Export orders rose to 51.2, and supplier deliveries slowed for an 11th straight month, a sign of longer lead times.

Based on past patterns, the October reading corresponds to annualized economic growth of about 2.7%, said Susan Spence, who chairs ISM’s manufacturing survey committee.

Economists had expected the index to hold at 54.5, Reuters reported. Manufacturing makes up about 9.4% of the economy, and activity is being driven by strong consumer spending and business investment in artificial intelligence. The government reported last week that domestic demand grew at its fastest pace in more than five years in the third quarter.

Not everyone expects it to last. “While AI-related investment is expected to remain strong, further shifts in AI sentiment, which has worsened in recent weeks, could weigh on investment plans,” said Veronica Clark, an economist at Citigroup. “Additionally, higher rates and recently tighter financial conditions could weigh on non-AI related parts of the manufacturing sector.”

Prices Still Climbing

Cost pressures eased slightly but remain intense. The prices index fell 2.7 points to 75.2, ISM said, marking the 25th straight month of rising raw material costs.

Spence pointed to higher steel and aluminum prices, tariffs on many imported goods and pricier petroleum-based products tied to the Middle East conflict.

Sentiment among purchasing managers also got worse for a third month, with 66% of their comments negative. Pricing volatility came up in 62% of those comments, longer lead times in 41%, tariffs in 25% and the Iran war in 21%.

“The still-elevated reading and persistent supplier delays argue against declaring the inflation challenge resolved,” TD Economics wrote, while calling the report’s demand signals encouraging.

The White House welcomed the numbers. In a RealClearMarkets column, trade adviser Peter Navarro said ISM “supplied the exclamation point” for a new administration report documenting what he called “an emerging American manufacturing renaissance.”

That Council of Economic Advisers report credits President Donald Trump’s tariff policies with encouraging companies to build factories in the U.S.

A separate survey offered a softer view. S&P Global’s U.S. manufacturing PMI fell about a point to 54.9 in October, Manufacturing Dive reported.

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