--- title: "ISM manufacturing PMI beats forecasts at 55.5 in October as production hits highest since 2021" url: "https://etf.net/news/ism-manufacturing-rises-on-inventories-2026-11-02" published_at: "2026-11-02T17:39:21.042Z" updated_at: "2026-11-02T20:37:46.990Z" byline: "ETF.net Research" --- # ISM manufacturing PMI beats forecasts at 55.5 in October as production hits highest since 2021 New orders barely moved, raw-material prices rose for a 25th month and purchasing managers’ comments turned more negative for a third month in a row. By ETF.net Research. Published Nov 2, 2026. U.S. factory activity grew faster than expected in October, the Institute for Supply Management said Monday. The gain came from production and inventories rather than new demand, and raw-material prices rose for a 25th straight month. ISM’s manufacturing index rose to **55.5** from 54.5 in September. Economists polled by Reuters had expected no change. It was the index’s second-highest reading since May 2022, behind July’s 55.6, and its 10th straight month above 50. A reading above 50 means more purchasing managers reported improvement than decline. Manufacturing makes up about 9.4% of the U.S. economy. The production index jumped to **59**, its highest since November 2021. New orders, the gauge of future demand, edged up only 0.2 point, to **55.5**. A reading above 50 means more purchasing managers reported improvement than decline. Manufacturing makes up about 9.4% of the U.S. economy. ## Inventories and production, not new orders, lift PMI The 55.5 weights new orders, production, employment, supplier deliveries and inventories equally. Order backlogs, customers’ inventories and prices are published beside it. They are not in the 55.5. Inventories swung back into expansion, to 51.4 from 48.6. Production rose to 59 from 56.7, the highest reading since November 2021, when it was 60.5. With equal weights, inventories’ larger swing counted for slightly more of the one-point gain than production did. New orders, the demand gauge, edged up to 55.5 from 55.3. Employment eased to 52.4 from 52.7, a fourth month of expansion, and slightly above the 52.0 in the Reuters poll. Deliveries from suppliers were slower for an 11th month. That index rose only to 59.1 from 59.0. Susan Spence, chair of ISM’s Manufacturing Business Survey Committee, said it is the only index in these reports that runs the other way: a reading above 50 means slower deliveries, which is typical when customer demand increases and suppliers fall behind. That higher reading is added into the headline. A tenth of a point barely moved the headline. New orders, employment and supplier deliveries roughly canceled out. Order backlogs cooled to 54.6 from 56.4, still above 50. Customers’ inventories are also outside the headline. Below 50, more managers said their customers were holding too little stock than too much. The reading was unchanged at 41.6, a 25th month in that “too low” territory. Spence said a too-low reading is usually positive for future production. Contraction also spread, even as the headline rose. Spence said 6% of manufacturing’s gross domestic product was contracting in October, up from 2% in September. That same 6% was in strong contraction, which ISM defines as a composite reading of 45 or lower, also up from 2%. ## ISM prices index eases to 75.2, but raw-material costs rise for a 25th month The prices index fell to **75.2** from 77.9. The Reuters poll had expected 77.5. The index has shown rising raw-material prices for a 25th straight month. In October, 53.1% of respondents reported higher prices, down from 58.6% in September, and 2.8% reported lower prices, the same share as the month before. The rest reported no change. ISM’s index counts the increases plus half of the no-change answers. That is how a 53.1% share becomes a reading of 75.2. A lower reading means fewer firms reported increases. It does not mean prices fell. Spence said prices were still being driven by steel and aluminum, by tariffs on many imported goods, and by petroleum-based products because of the Middle East conflict. A chemical-products firm told the survey its costs are up more than 6% this year, against the 2% to 3% it usually plans for. S&P Global’s separate manufacturing survey, also released Monday, found selling prices rising at the steepest pace since September 2022. Chris Williamson, chief business economist at S&P Global Market Intelligence, said in the firm’s [release](https://www.pmi.spglobal.com/Public/Home/PressRelease/2851b1ead435484bb938294bf3d8bcfd) that the pace would keep inflation well above the Federal Reserve’s target and add to pressure to raise interest rates further. ## PManufacturers’ comments turn more negative on prices, lead times and tariffs Spence said the tone of comments worsened for a third straight month, with 34% positive and 66% negative. Pricing volatility came up in 62% of the negative comments, longer lead times in 41% and tariffs in 25%. Most of those comments named more than one of those pressures. Production comments were the exception. Spence said positive remarks there outnumbered negative ones by 2 to 1, up from 1.6 to 1 in September. A machinery firm, describing demand from semiconductors and from government and defense work, said a four-week lead time is now 50 weeks. “A US$2,000 item six months ago is now $4,000.” In transportation equipment, a respondent said customers were stunned by prices, and that the usual late-year spending never showed up. “Typically, we see a fourth-quarter bump as customers use up end-of-year budgets. This year, that bump does not exist.” ## Stocks rise on oil’s slide, tech rebound, not the factory report Stocks were already higher before the 10 a.m. Eastern time release, and they were still higher late in the morning. Just after 9:30 a.m. ET, the S&P 500 was up 0.5%, [CNBC reported](https://www.cnbc.com/2026/11/01/stock-market-today-live-updates.html). CNBC’s account, updated at 11:55 a.m. ET, had the index up 0.6%. CNBC put the gains on a sharp drop in oil and a rebound in some technology shares, with earnings and this week’s midterm elections ahead, not on the factory survey. Matthew Graham, writing on Mortgage News Daily, said the first reaction to the survey was a modest bounce toward slightly higher yields and slightly higher stock prices. Bonds, he wrote, were still 4 to 5 basis points lower than Friday morning. U.S. crude was at $96.55 as of 12:18 p.m. ET, down 7.3% from Friday’s settle. [CNBC reported](https://www.cnbc.com/2026/11/02/oil-prices-fall-as-iran-us-pursue-diplomacy.html) that oil fell as senior U.S. and Iranian officials signaled they were open to a diplomatic solution to a conflict that has disrupted energy markets for eight months. Source: etf.net, https://etf.net/news/ism-manufacturing-rises-on-inventories-2026-11-02. Please cite the page URL.