Survey Shows U.S. Manufacturing Activity Improves in October

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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 grew in October, according to the Institute of Supply Management's (ISM) Purchasing Managers Index (PMI) survey, although price volatility and economic uncertainty remain a concern.

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Manufacturing Activity Jumps

Economic activity in U.S. manufacturing grew in October, according to the Institute of Supply Management's (ISM) latest Purchasing Managers Index (PMI) survey, although price volatility and economic uncertainty remain a concern.

The PMI, which tracks 18 manufacturing sectors in the U.S., registered 55.5% in October, compared with 54.5% in September, 54.6% in August and 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 $861 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 October, 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, four (New Orders, Production, Supplier Deliveries and Inventories) grew faster than the previous month, she said.

Production, in particular, reached its highest level since November 2021.

However, "general sentiment got worse for a third month in a row." She noted 34% of the respondents' comments were positive and 66% negative.

Pricing volatility was mentioned in 62% of negative comments (up from 46% last month), followed by longer lead times (41%), tariffs (25%) and the Iran War (21%).

Manufacturers See Pricing Volatility, Economic Uncertainty

Although October's Prices Index--an indicator of input and raw materials costs--improved slightly, it still indicates raw materials prices increased for the 25th 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 headwinds facing U.S. manufacturing.

One comment from a Miscellaneous Manufacturing respondent said: "New month, same trends: Any commodity consumed by AI/data centers is in a crunch, both for supply and pricing. We keep wondering when the madness will stop. In spite of these challenges, our demand remains strong and the supply chain is getting by, albeit with a lot of work. As we plan next year's budget, it's sobering to roll up the annualized impact of (1) remaining tariffs, (2) AI-impacted commodity price increases and (3) price increases related to geopolitically influenced commodities."

One comment from a Fabricated Metal Products respondent said: "Economic policies coming out of Washington continue to weigh on business conditions. Customers are unwilling to make commitments to anything other than the shortest term due to the vast uncertainty."

One respondent from Machinery said strong business is driven by data centers, while another pointed to "explosive growth in the semiconductor and government/defense spaces."

"The long-awaited wave has arrived for our company, and it seems the global supply chain is in similar straits. Lead times and prices are increasing, and some carry COVID-19 era delays -- four weeks is now 50 weeks; a US$2,000 item six months ago is now $4,000."

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 Equinix Incorporated is building out the second data center building at a three-building campus in San Jose, California, while Quality Technology Services is constructing the sixth and final data center building at a campus in Manassas, Virginia.

Google has kicked off construction of a planned two-building campus in Haskell, Texas, in the Abilene area, designed to expand AI cloud infrastructure in the region. Readers can learn more from related project reports.

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

In the heavy-manufacturing sector and related to defense, Northrop Grumman recently broke ground on its new production facility in Palmdale, California, designed for the manufacture of the B-21 Raider being developed for the U.S. Air Force. Meanwhile, L3Harris is expanding its Canoga Park Aerospace Propulsion Systems Plant in California, adding manufacturing and assembly space to increase production capacity and support the company's involvement in defense and space programs. View the related project reports here.

For more information on defense-related capital spending in the U.S., see October 14, 2026, article - U.S. Military Contractors Spend Big Amid Defense Demand.

Key Takeaways

• The ISM's PMI survey shows U.S. manufacturing activity grew in September.
• Pricing volatility and economic uncertainty remain a concern for manufacturers.
• $861 billion: Total 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).