U.S. manufacturing kicked off November with its strongest print in months, as the ISM Manufacturing PMI jumped to 55.5 in October — a full point above September’s 54.5 and well ahead of the 54.6 consensus. Production surged to its highest level since November 2021, but the factory-floor optimism was tempered by a separate report showing construction spending cratered 1.9% in September — the sharpest drop of 2026.
The split-screen was stark: manufacturing has now expanded for 10 straight months, shrugging off the triple headwind of elevated prices, tariff uncertainty, and the Iran conflict. Construction, by contrast, is buckling under the weight of those same forces — higher materials costs, labor shortages, and cautious buyers.
The Numbers
ISM Manufacturing PMI — October 2026 (source: Institute for Supply Management):- Headline PMI: 55.5 vs. 54.6 consensus (+0.9 beat), up from 54.5 in September
- Production: 59.0 (vs. 56.7) — highest since November 2021, +2.3 points
- New Orders: 55.5 (vs. 55.3) — 10th straight month of growth
- Employment: 52.4 (vs. 52.7) — down 0.3, but still expanding for a 4th month
- Prices: 75.2 (vs. 77.9) — eased 2.7 points but remains highly elevated; 24th straight month of increases
- Supplier Deliveries: 59.1 (vs. 59.0) — 11th month of slowing, still pointing to supply-chain friction
- Inventories: 51.4 (vs. 48.6) — returned to expansion, +2.8 points
- Backlog of Orders: 54.6 (vs. 56.4) — down 1.8, but still growing
- Customer Inventories: 41.6 — unchanged, perceived as “too low” for a 25th month
- MoM change: -1.9% vs. +0.4% consensus — a massive 2.3-point miss
- Prior month: +0.9% in August (revised up from -0.1%)
- Year-over-year: down 1.7% from September 2025
What Manufacturers Are Saying
ISM Chair Susan Spence reported that sentiment deteriorated for a third straight month: only 34% of comments were positive while 66% were negative. Among the negative responses, pricing volatility dominated at 62%, followed by longer lead times (41%), tariffs (25%), and the Iran war (21%). Most respondents cited multiple headwinds simultaneously.A machinery respondent captured the AI-driven bifurcation: “Explosive growth in the semiconductor and government/defense spaces has put us on our heels… Lead times and prices are increasing, and some carry COVID-19 era delays — four weeks is now 50 weeks; a $2,000 item six months ago is now $4,000.” But not every sector is feeling the heat equally. Five of the six largest manufacturing industries expanded in October — Machinery, Computer & Electronic Products, Transportation Equipment, Chemical Products, and Food, Beverage & Tobacco all registered growth.“Inflationary pressures and volatile commodity markets continue to create challenging scenarios and unfavorable impact to purchase price variance. Diesel rates and the trucker shortage are impacting costs beyond the raw material inputs to levels I have never seen.” — Food, Beverage & Tobacco Products respondent
Market Reaction
Markets opened November on a broadly positive note. The S&P 500 rose, the 10-year Treasury yield touched an 8-week low, and the dollar weakened — a trifecta that suggests investors are betting the Fed can navigate manufacturing strength without additional rate hikes. Gold rebounded and silver surged 4%, while crude oil extended its slide to more than 6% as Middle East supply fears continued to recede.- S&P 500: higher to start November (Trading Economics)
- 10-year Treasury yield: lowest in 8 weeks (Trading Economics)
- U.S. Dollar: lower, extending recent softness
- Gold: rebounding on easing inflation concerns
- Silver: surged 4%
- Crude oil: down more than 6%, extending a sharp selloff