Manufacturing Expands as Input Costs Accelerate; Construction Spending Rises — Evening Brief – 10.01.26
U.S. manufacturing expanded for a ninth straight month in September, though growth slowed modestly and input-cost pressures intensified, according to the Institute for Supply Management. Separate data showed a sharp increase in construction spending, adding to evidence that the economy retained momentum entering the fourth quarter.
The ISM Manufacturing PMI slipped to 54.5 from 54.6 in August, below economists’ 55.0 forecast. Readings above 50 indicate expansion. The overall economy has expanded for 23 consecutive months, and an ISM manufacturing reading above 47.5 over time is generally consistent with broader economic growth.
New orders strengthened to 55.3 from 53.7, while the backlog-of-orders index climbed to 56.4 from 51.8. Production eased but remained strong at 56.7, down from 58.3. Employment also accelerated, rising to 52.7 from 51.2.
The report’s sharpest movement came in prices. The prices-paid index jumped to 77.9 from 71.1, a signal that manufacturers faced renewed pressure from raw-material and other input costs. Supplier deliveries were little changed at 59.0, while inventories fell into contraction at 48.6 from 50.6. New export orders dropped to 50.9 from 53.2, and imports declined to 51.0 from 52.5.
“Of the five subindexes that make up the PMI, only New Orders and Employment grew faster than the previous month,” Susan Spence, chair of the ISM Manufacturing Business Survey Committee, said in the report. She said 40% of respondent comments were positive and 60% negative, a 1-to-1.6 ratio.
A separate S&P Global survey painted a stronger picture. Its final U.S. manufacturing PMI registered 55.9 in September, down from a 57.0 preliminary estimate but up from 53.9 in August. The reading marked the sector’s best performance since May 2022 as production and new orders accelerated.
Meanwhile, construction spending rose 0.9% in August to a seasonally adjusted annual rate of $2.20 trillion, reversing a revised 0.1% decline in July. Private construction rose 1.1% to $1.66 trillion, while public construction edged 0.2% higher to $547.8 billion. Total spending was 1.7% below its year-earlier level.