ISM manufacturing holds at 54.5%, but its prices index jumps 6.8 points to 77.9%, back to the start of the Iran war

U.S. manufacturing grew for the ninth straight month in September, but no faster. The Institute for Supply Management's Manufacturing PMI registered 54.5%, down 0.1 point from August's 54.6% and just under the 55 forecast on our markets calendar, according to the ISM report released Thursday. Readings above 50 mean expansion.

The flat headline hides two moves going in opposite directions: orders picked up, and so did what factories pay.

The number behind the number: prices

The Prices Index rose 6.8 points to 77.9%, close to the 78.3% it hit in March at the start of the Iran war, and raw material prices have now risen for 24 straight months, ISM said. The share of purchasing managers reporting higher prices jumped to 58.6% from 46.2%. Sixteen of 18 industries paid more, and none paid less.

ISM chair Susan Spence named three drivers: steel and aluminum increases "that impact the entire value chain," tariffs on imported goods, and petroleum-based products pushed up by the Middle East conflict. Respondents' complaints line up with that. Pricing volatility appeared in 46% of negative comments, tariffs in 34% and the Iran war in 30%. Overall sentiment soured, with 60% of comments negative.

Who it hits: anyone buying metal, fuel and components

The report's commodity list is the practical part for a business owner. Items reported up in price include aluminum, on the list for 34 straight months, steel for 11, hot-rolled steel for 9, copper for 15, diesel fuel, freight, resins and electrical components. Steel, copper, electrical components and electronic components were also listed as in short supply.

That is the materials bill for the building trades. An electrical contractor, an HVAC installer or a roofer quoting a job today for work in November is pricing copper wire, sheet metal and steel that their suppliers are still marking up. One machinery maker told ISM that "higher steel costs each month increase our raw-material and finished-goods costs," and a fabricated metal producer said steel availability "is getting worse." For a fixed-price bid, the risk is the gap between the quote and the purchase order.

141,913 independent construction and contractors are listed on CheckThisBiz, a directory of 7,704,724 independent US businesses, including 12,896 in TX, 12,642 in CA, 11,414 in FL. Chains and franchises are excluded from that count, so these are the owner-operated businesses that actually apply for funding.

Backlogs are the other signal. The Backlog of Orders Index jumped 4.6 points to 56.4%, and the Customers' Inventories Index, at 41.6%, says factory customers think their own stock is too low, which ISM usually reads as positive for future production. More orders plus slower deliveries (the Supplier Deliveries Index was 59%, the 10th month of slowing) means longer lead times on equipment and parts.

Why the bond market cares

A prices gauge back at war-start levels lands while the 10-year Treasury yield sits at 5.26%, on our markets board, near the highest since 2002. Factory input costs are not consumer inflation, but ISM notes a Prices Index above 52.8% is generally consistent with rising producer prices for intermediate materials. The next readings are Friday's September jobs report and the Oct. 14 consumer price index.

Sources: Institute for Supply Management, September 2026 Manufacturing PMI Report; forecast and Treasury yield from our markets data; business counts from CheckThisBiz. This is market information, not investment advice.