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Photo: Samuel Zeller, via Wikimedia Commons (CC0). File photo of an assembly line, not a photo of a specific factory surveyed in October.
American manufacturing picked up speed in October, with activity expanding for a tenth straight month and production reaching its strongest level in nearly five years, according to the Institute for Supply Management's closely watched monthly survey released on Monday, November 2, 2026.
The ISM Manufacturing PMI rose to 55.5 percent in October from 54.5 percent in September, beating economists' forecasts for an unchanged reading. A reading above 50 signals expansion. The sector has now been in growth territory all year, and the overall economy has expanded for 24 consecutive months, ISM said.
What drove the beat
The production index jumped to 59.0 percent, up from 56.7 percent in September and its highest since November 2021. New orders edged up to 55.5 percent from 55.3 percent, their tenth consecutive month of growth, and export orders also rose. Supplier deliveries registered 59.1 percent, while the backlog of orders stood at 54.6 percent.
Factory employment stayed in expansion at 52.4 percent, slightly down from 52.7 percent in September but above economists' forecast of 52.0 percent. It was the fourth straight reading above 50 after a 33-month stretch in contraction.
Reuters attributed the strength to solid domestic demand, driven by robust consumer spending and business spending on artificial intelligence. The government reported last week that domestic demand surged at its strongest pace in more than five years in the third quarter, and the overall economy grew at a 3.4 percent annualized rate last quarter.
The inflation catch
The report was not all good news. The prices-paid index, which measures how broadly manufacturers face rising input costs, eased to 75.2 percent from 77.9 percent in September — still a very high level. Reuters reported that the reading supports economists' views that inflation will continue to run above the Federal Reserve's 2 percent target into 2027.
That matters for interest rates. The Federal Reserve raised its policy rate in September and is expected to increase borrowing costs again in December, as policymakers try to bring inflation down without throwing people out of work.
Business sentiment also darkened. ISM said general sentiment got worse for a third month in a row, with 66 percent of survey comments negative and only 34 percent positive. "In October, U.S. manufacturing activity remained in expansion territory," said Susan Spence, chair of ISM's Manufacturing Business Survey Committee.
What it means on the eve of the midterms
The data lands one day before Americans vote in midterm elections that will decide control of Congress, and it sharpens a paradox that has defined the campaign: headline economic figures look strong — growth is solid, unemployment was 4.2 percent in September, and factories are expanding — while many voters say they still feel squeezed by prices.
For markets, the PMI report is unlikely to move stocks much on its own, Barron's noted, unless it surprises — and this one did, modestly, to the upside. For the Fed, the combination of faster factory growth and stubbornly high input prices keeps the December rate decision finely balanced: growth argues for patience, prices argue for another hike.
The next ISM manufacturing report, covering November, is due on December 1.
Sources: Institute for Supply Management, October 2026 Manufacturing PMI Report, November 2, 2026; Reuters, November 2, 2026; Barron's, November 2, 2026. Survey figures are as reported by ISM; the interpretation that inflation will stay above the Fed's target into 2027 is economists' views as reported by Reuters.