US manufacturing PMI holds at 54.5 as costs rise
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US manufacturing expanded for a ninth straight month in September, but the latest data show that rising costs are becoming a bigger concern even as demand improves.
The Institute for Supply Management’s Manufacturing PMI registered 54.5 in September, down slightly from 54.6 in August. Any reading above 50 signals expansion.
The headline figure was broadly stable, but several underlying measures strengthened. New orders rose to 55.3 from 53.7, while employment increased to 52.7 from 51.2. Production remained firmly in expansion at 56.7.
At the same time, the Prices Index jumped 6.8 points to 77.9.
The figures point to a mixed operating environment. Manufacturers are receiving more orders, but many are also paying more for the materials and services needed to meet that demand.
For industrial businesses, the main concern is changing. Demand appears more stable than it was during the contraction that ended in late 2025. The challenge now is whether producers can turn that demand into profitable growth while costs, delivery times and capacity pressures remain high.
Stronger orders are putting more pressure on capacity
The rise in new orders is one of the more positive signals in the September data.
The New Orders Index reached 55.3, while production remained at 56.7. Employment also strengthened during the month, suggesting manufacturers are still adding labor as activity expands.
12 manufacturing industries grew in September, while only two contracted. Five of the six largest manufacturing industries also expanded, including computer and electronic products, transportation equipment, machinery, chemicals and food and beverage products.
Those figures suggest that growth is spread across a relatively broad part of the sector.
There are also signs that manufacturers may have more work ahead. Backlogs remained in expansion territory, while customer inventories stayed low. Lean customer stock levels can support future demand if businesses decide they need to replenish inventories.
That does not mean manufacturers can assume stronger demand will continue without interruption.
IndustryWeek reported that 60% of survey comments were negative. Respondents raised concerns about tariffs, geopolitical uncertainty and the cost of raw materials, even as some reported healthy order levels.
That combination matters.
Manufacturers can have strong order books while still becoming more cautious about future investment, hiring or capacity. If customers are bringing orders forward because they expect tariffs or prices to rise, current demand may also be stronger than underlying conditions suggest.
For now, though, companies appear to have enough demand to keep production growing.
Higher prices could make growth harder to sustain
The clearest warning in the September data came from prices.
The Prices Index rose from 71.1 in August to 77.9 in September, a sharp increase in a single month.
IndustryWeek linked that rise to higher steel and aluminum prices, tariffs and petroleum-based products.
These pressures can affect manufacturers in several ways.
Higher metals costs can raise expenses for machinery, transportation equipment and fabricated products. More expensive energy and petroleum-based materials can also spread through packaging, freight and production costs.
Tariffs add another layer of uncertainty. Companies may face higher import costs while also reconsidering suppliers, sourcing locations and inventory levels.
For manufacturers operating on fixed-price contracts or in highly competitive markets, those increases can be difficult to pass on to customers.
That makes margins an important part of the story.
A stronger order book does not automatically mean stronger earnings. If input prices rise faster than selling prices, manufacturers may see revenue improve while profitability comes under pressure.
Supply conditions could make that harder to manage.
IndustryWeek reported ongoing concern around lead times and cross-border supply chains. One machinery-sector respondent said tariffs affecting Canada had increased costs and disrupted established supply relationships.
That is particularly important for manufacturers that depend on specialized suppliers or imported components. Replacing those suppliers can take time, and alternative sources may not offer the same price, quality or delivery performance.
As a result, manufacturers may have to balance three competing priorities: meeting current orders, protecting margins and securing enough material to keep production moving.
Manufacturers now need to watch costs as closely as demand
September’s figures do not point to an outright manufacturing boom.
They do show that the sector remains in expansion and that demand is holding up across a broad range of industries.
The next test will be whether that expansion can continue if input prices remain high.
Customer inventories will be one measure to watch. If businesses begin rebuilding stock, manufacturers could see further order growth.
Backlogs will be another. A continued increase would support production, but it could also show that factories and suppliers are struggling to keep pace.
Pricing will remain central. The rise in the Prices Index raises questions about how much additional cost producers can absorb and how much they can pass on.
Manufacturers will also need to monitor tariffs, supplier lead times and material availability. Each can affect production planning even when customer demand remains healthy.
The September data therefore point to a sector that is still growing, but under more pressure.
Orders remain strong enough to support production, while employment has improved and most major manufacturing industries are expanding. At the same time, the cost of meeting that demand is rising.
If those conditions continue, the next stage of US manufacturing growth may depend less on finding customers and more on controlling costs, maintaining supply and managing capacity.
Source:
IndustryWeek
