Back to November 2025 Industry Update
November 2025 Industry Update: Economy
Domestic manufacturing activity contracted at a faster rate in October compared to September, driven by softening in production and inventories, while new orders improved slightly.
United States ISM Manufacturing PMI
Key Points
- The Institute for Supply Management® (ISM®) Manufacturing PMI® registered 48.7% in October, 0.4% lower than September’s reading of 49.1% and remains in contraction territory.
- The New Orders Index registered 49.4% in October, 0.5% higher compared to September’s reading of 48.9%, and remains in moderate contraction territory.
- The Production Index registered 48.2% in October, 2.8% lower than the 51.0% recorded in September and a return to contraction territory.
- The Employment Index registered 46.0% in October, 0.7% higher than the 45.3% recorded in September.
- The Supplier Deliveries Index registered 54.2% in October, 1.6% higher than September’s reading of 52.6%.
- The Inventories Index registered 45.8% in October, 1.9% lower than September’s reading of 47.7%.
Summary
U.S. manufacturing activity contracted for the eighth consecutive month in October and at a faster pace than in September, signaling continued weakness across the industrial sector. According to the latest ISM® Manufacturing PMI® Report, the headline index declined by 0.4 percentage points, driven primarily by downturns in the Production and Inventories indexes. The report noted that the sequential momentum observed in recent months — beginning with modest gains in New Orders in August and extending to Production in September — culminated in a 1.7-point increase in the Backlog of Orders Index in October. However, the improvement in order backlogs was insufficient to offset broader declines across key components, leaving the overall index largely unchanged. From a broader perspective, October marked the 66th consecutive month of overall economic expansion for the United States following a single month of contraction in April 2020, as a PMI® reading above 42.3% over time remains consistent with sustained economic growth.
All four demand-related components — New Orders, New Export Orders, Backlog of Orders and Customers’ Inventories — improved modestly in October, though each continued to signal contraction. The Customers’ Inventories Index remained a relative bright spot, contracting at a slower pace and staying in “too low” territory, which is generally supportive of future production activity. Meanwhile, output conditions weakened as the Production Index registered a notable decline, exerting a 0.4-point drag on the overall PMI®. Respondent sentiment reflected a 1-to-1.5 ratio of positive to negative commentary regarding production levels, underscoring lingering uncertainty. Labor conditions also remained soft, with panelists reporting a 1-to-3.4 ratio of hiring to workforce reductions as companies continue to prioritize headcount management through layoffs and hiring freezes.
Among the six largest manufacturing industries — Chemical Products; Transportation Equipment; Computer & Electronic Products; Food, Beverage & Tobacco Products; Machinery; and Petroleum & Coal Products — only two reported growth in October (Food, Beverage & Tobacco Products and Transportation Equipment), up from just one in September.
Why It Matters
Ongoing volatility in U.S. trade and tariff policy continued to weigh on the domestic manufacturing sector in October, preventing a meaningful return to growth, according to the latest ISM® Manufacturing PMI® Report on Business®. After registering a modest 0.4-point improvement in September, the Manufacturing PMI® reversed course in October, contracting at a faster rate and falling short of the consensus estimate of 49.3%. As in recent months, tariff-related concerns remained the dominant theme among survey respondents, with 54% of Manufacturing Business Survey Committee panelists citing tariffs as the primary headwind, making it the top-mentioned issue once again.
According to Susan Spence, MBA, Chair of the ISM® Manufacturing Business Survey Committee, the sector appears to be mired in a period of stagnation, with intermittent signs of stabilization proving short-lived. Spence noted that while demand indicators showed marginal improvement in October relative to September, they remain in contraction territory and continue to lack momentum for sustained recovery. She further highlighted that Customers’ Inventories have remained in “too low” territory for several consecutive months, signaling persistently lean product levels that have yet to translate into renewed strength in new orders.
A modest bright spot emerged from the Prices Index, which fell 3.9 percentage points to 58.0% — its first reading below 60% since January — indicating some easing of inflationary pressure within the manufacturing supply chain. Nonetheless, prices continue to expand at a historically elevated pace, driven largely by higher aluminum and steel costs that ripple across the broader value chain. Despite the persistent softness in underlying fundamentals, the Manufacturing PMI® continues to signal only mild contraction rather than a deeper downturn. Whether this pattern reflects underlying resilience or merely precedes a broader sector correction remains to be seen. Any potential tailwinds from the recently enacted “One Big Beautiful Bill” tax package or the Federal Reserve’s latest interest-rate cut are likely to be muted so long as demand conditions remain weak and trade policy uncertainty persists.