US ISM manufacturing PMI rises to 55.5; output at five-year high

American factories grew faster in October 2026, according to the Institute for Supply Management (ISM), which released its monthly survey of purchasing managers on Monday, 2 November. The ISM manufacturing purchasing managers' index (PMI) rose to 55.5% from 54.5% in September, the tenth month in a row above 50, the line that separates growth from contraction. All five parts of the index were in growth territory, and the production measure reached 59.0, its highest since November 2021. But the survey also showed prices still rising fast and managers in a gloomy mood, with two in three of their comments negative as tariffs, the war involving Iran and slower deliveries weighed on them.

A purchasing managers' index is built from a monthly survey of the people who buy raw materials and parts for companies. They are asked whether new orders, output, hiring, delivery times and stock levels are higher or lower than a month before. A reading above 50 means more of them report growth than decline. Because buyers see changes in demand before they show up in official statistics, the index is watched closely by central banks, investors and governments as an early signal of where the economy is heading.

By that measure, October was strong. A reading of 55.5 is well into growth territory, and production at a near five-year high shows factories are turning orders into goods at a quick pace. ISM chair Susan Spence said the October reading corresponds to a 2.7% annualised increase in real gross domestic product, based on the relationship ISM has measured between its index and the wider economy over time.

The weak spot is cost. A prices index at 75.2 means a large majority of buyers are reporting higher prices for what they purchase. That has now been true at a reading above 70 for nine months. High input costs tend to be passed on to customers, which feeds inflation and makes it harder for the US Federal Reserve to lower interest rates.

The comments explain why managers are uneasy even while business grows. ISM's roundup listed tariffs, the war involving Iran, frustration with inflation and slower supplier deliveries as the main worries. Slower deliveries technically push the index up, because the survey treats them as a sign of strong demand, but in a war and tariff setting they can also mean supply chains under strain. So part of October's rise reflects friction rather than pure strength.

For India, US factory demand matters in two ways. The United States is one of India's largest export markets for engineering goods, auto parts, chemicals and pharmaceuticals, so stronger American production can support orders for Indian suppliers. At the same time, persistent US price pressure keeps global interest rates higher for longer, which affects the rupee and foreign investment flows into Indian markets.

Peepals calculation: Production rose 2.3 points to 59.0, so it was 56.7 in September (59.0 − 2.3 = 56.7). The prices index, at 75.2, is 19.7 points above the headline PMI of 55.5 (75.2 − 55.5 = 19.7), a wide gap that shows cost pressure running well ahead of overall activity. Negative comments outnumbered positive ones by nearly two to one (66 ÷ 34 ≈ 1.9). Our calculation from the reported figures.

Short-term: The stronger reading supports the view that US industry is still growing despite tariffs and the war involving Iran, but high prices keep inflation concerns alive for policymakers.

Long-term: If prices stay above 70 while managers' mood keeps worsening, the gap between today's activity and future confidence could narrow growth later. A cooling of new orders would be the first sign.

Who is affected: US manufacturers and their workers; suppliers abroad, including Indian exporters of parts, chemicals and engineering goods; investors watching interest rates; and the Federal Reserve.

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