Survey Shows U.S. Manufacturing Activity Dips Slightly

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Written by Danny Levin, Deputy Editor for IIR News Intelligence (Sugar Land, Texas)

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Summary

U.S. manufacturing activity dipped slightly in September, according to the Institute of Supply Management's (ISM) Purchasing Managers Index (PMI) survey, although high raw material prices and U.S. tariffs on Canada loom.

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Manufacturing Activity

Economic activity in U.S. manufacturing dipped slightly, according to the Institute of Supply Management's (ISM) latest Purchasing Managers Index (PMI) survey, which comes amid high raw material prices and U.S. tariffs on Canada.

The PMI, which tracks 18 manufacturing sectors in the U.S., registered 54.5 in September, compared with 54.6% in August and down from 55.6% in July. Any reading over 50% indicates expansion in the manufacturing economy. July's reading was the highest since May 2022.

According to Industrial Info Resources data, there are $785 billion worth of projects under construction in the U.S. Industrial Manufacturing Industry; more than half of the investment is attributed to data centers and semiconductors. Industrial Info Resources offers more information in its Global Market Intelligence (GMI) Project Database, where readers can consult a full list of project reports.

Any reading under 50% indicates contraction in the manufacturing economy.

"In September, U.S. manufacturing activity remained in expansion territory," said Susan Spence, chair of ISM's Manufacturing Business Survey Committee, in a summary of findings. "Of the five subindexes that make up the PMI, only New Orders and Employment grew faster than the previous month."

In terms of output, September's Production Index grew at a slower pace when compared with August.

Spence noted 40% of the respondents' comments were positive (42% in August) and 60% negative (58%).

Pricing volatility was mentioned in 46% of negative comments, an improvement from August's level, followed by tariffs (34%), the Iran war (30%) and increasing lead times (21%). This indicates concerns over tariffs increased, although the percentage for the Iran war remained flat and lead times improved.

Economic Headwinds

September's Prices Index--an indicator of input and raw materials costs--jumped 6.8% from 71.1% in August--moving close to its level at the beginning of the Iran war. It also indicates raw materials prices increased for the 24th straight month.

The elevated index continues to be driven by increases in steel and aluminum prices impacting the entire value chain; tariffs applied to many imported goods; and increases in petroleum-based products because of the recent Middle East conflict.

Survey respondents had much to say about the economic headwinds facing U.S. manufacturing.

One comment from an Electrical Equipment, Appliances & Components respondent said: "Raw metals continue to be challenging, especially with the uncertain nature of tariffs being on and off again. New tariffs against Canada have drastically increased costs for capital expenses as well as assemblies."

Another from Machinery said: "Orders have doubled yet again, and delivery times have also doubled, in the semiconductor, electronics and government sectors, with remaining sectors flat to down. Coupled with supply chain lead times and pricing pressures, the factory backlog has nearly doubled. Canada tariffs have impacted cross-border costs and left our supply chain team scrambling."

One respondent from Computer & Electronic Products said the "U.S. tariff schedule is providing challenges. Finding alternate sources of supply outside of China, local pushback on data centers in the U.S. and continuing material/component shortages are affecting business." Still, another from the same category said its manufacturing activity "remains stable."

The ISM considers semiconductors and data-center components to be part of the latter sector.

Strong U.S. Manufacturing Capex

According to Industrial Info Resources data, the data center sector accounts for about 50% of the total investment value of U.S. Industrial Manufacturing Industry projects under construction.

Data center developer CyrusOne LLC is constructing the first building (SAT14A) at its grassroot data center campus in Castroville, Texas, east of San Antonio, which will utilize a closed-loop cooling system. Construction could wrap up next year, with the subsequent second building (SAT14B) potentially kicking off afterward. Readers can learn more from a detailed list of project reports.

However, development in the state could be impacted by Gov. Greg Abbott's (R) recent decision to direct Texas' environmental regulator to halt permits for data centers, with the moratorium expected to last until mid-December. For more information, see September 23, 2026, article - Texas Governor Abbott Pauses State Data Center Permitting--Until December.

While data centers and semiconductors account for some of the highest-valued projects, other areas are featured.

Amazon.com Incorporated is building an estimated 800,000-square-foot robotics manufacturing facility in Austin, Texas, designed to produce robotics systems for its fulfillment centers. Readers can view a detailed plant profile and project report.

Automotive projects under construction include Stellantis' $130 million retooling of its Detroit Assembly Complex - Jefferson in Michigan, with the project designed to support its plans to manufacture the next-generation Dodge Durango. Production is expected to launch in 2029. View the project report here.

Key Takeaways

• The ISM's PMI survey shows U.S. manufacturing activity in September dipped slightly month-over-month.
• Economic uncertainty, particularly U.S. tariffs on Canada and the Iran war, remain a concern for manufacturers.
• $785 billion: value of projects under construction in the U.S. Industrial Manufacturing Industry. About half is attributed to data centers.

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About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, Industrial Info Resources is tracking over 250,000 current and future projects worth $30.2 trillion (USD).