U.S. September Manufacturing PMI at 54.5%... Expanding for 9 Consecutive Months

[Mexico City = Shim Young-jae, Correspondent] The U.S. manufacturing sector has continued its expansion for the ninth consecutive month. The manufacturing Purchasing Managers' Index (PMI) for September was recorded at 54.5%, a decrease of 0.1 percentage points from the previous month, but still above the expansion threshold of 50%. While new orders and employment improved, the price index, which reflects raw material costs, surged to 77.9%, an increase of 6.8 percentage points.

According to the September manufacturing PMI report released by the Institute for Supply Management (ISM) on the 1st (local time), the manufacturing PMI stood at 54.5%. This is 0.1 percentage points lower than August's 54.6%. The manufacturing sector has expanded for nine consecutive months, while the overall U.S. economy has continued to expand for 23 months in a row.

New Orders at 55.3% and Production at 56.7%... Continued Expansion in Manufacturing

According to ISM, the new orders index for September rose to 55.3%, up 1.6 percentage points from August's 53.7%. This marks the end of four consecutive months of contraction and the beginning of nine months of expansion.

The production index fell to 56.7%, down 1.6 percentage points from August's 58.3%. However, production has expanded for 11 consecutive months.

The employment index rose to 52.7%, up 1.5 percentage points from the previous month's 51.2%. Among the 18 manufacturing sectors, employment increased in eight sectors, including electrical equipment, appliances, components, primary metals, and wood products.

Susan Spence, chair of the ISM Manufacturing Business Survey Committee, stated, "Manufacturing activity in the U.S. remained in the expansion zone in September," explaining that only new orders and employment among the five sub-indices that make up the PMI increased faster than the previous month.

According to ISM, 40% of the total responses in September were positive, while 60% were negative. The ratio of positive to negative opinions was 1 to 1.6.

Among the negative opinions, 46% mentioned price volatility. Tariffs were mentioned by 34%, the Iran war by 30%, and increased lead times by 21%. Many responses cited multiple factors together.

Price Index at 77.9%... Up 6.8 Percentage Points in a Month

While manufacturing expansion continued, price pressures significantly increased. According to ISM, the price index for September rose to 77.9%, up 6.8 percentage points from August's 71.1%. Raw material prices have risen for 24 consecutive months.

The September price index approached the 78.3% recorded in March, when the Iran war began. In the September survey, the percentage of respondents reporting an increase in raw material prices was 58.6%, up 12.4 percentage points from August's 46.2%.

ISM explained that rising prices for steel and aluminum, tariffs imposed on many imports, and increased prices for oil-based products due to Middle Eastern conflicts are driving up the price index.

All six major manufacturing sectors, including petroleum and coal products, machinery, food, beverages, and tobacco products, computers and electronics, chemicals, and transportation equipment, reported price increases in September.

Among the 18 manufacturing sectors surveyed by ISM, 16 reported increases in raw material purchase prices. No sectors reported price decreases.

By item, prices for aluminum, copper, electrical and electronic components, transportation costs, fuel, memory components, semiconductors, steel, hot-rolled steel sheets, stainless steel, and zinc were found to have increased.

Order Backlog at 56.4%... Customer Inventory at 41.6%

Demand-related indicators showed strong performance in new orders and order backlogs.

According to ISM, the order backlog index rose to 56.4%, up 4.6 percentage points from August's 51.8%. Order backlogs increased in major sectors such as computers and electronics, transportation equipment, and food, beverages, and tobacco products.

The new export orders index fell to 50.9%, down 2.3 percentage points from the previous month's 53.2%, but remained in the expansion zone. The import index also dropped from 52.5% to 51.0%, a decrease of 1.5 percentage points, but continued to expand.

The customer inventory index fell to 41.6%, down 1.2 percentage points from August's 42.8%. ISM explained that customer inventories remain at a 'too low' level, which is typically viewed as a positive signal for future production.

In contrast, the manufacturers' own inventory index fell to 48.6%, down 2.0 percentage points from August's 50.6%. This shifted from expansion to contraction.

The supplier delivery index fell to 59.0%, down 0.3 percentage points from August's 59.3%. This index indicates that if it exceeds 50%, the speed of supplier deliveries is slowing down. Supplier deliveries have slowed for 10 consecutive months.

Ongoing Burdens from Tariffs, Supply Chain, and Labor Shortages

Responses from companies disclosed by ISM repeatedly mentioned tariffs, raw material prices, and supply chain issues.

Respondents in the computers and electronics sector stated that U.S. tariff policies are causing difficulties in the supply chain. They also explained that the search for alternative suppliers outside of China and shortages of materials and components are impacting their businesses.

Respondents in the machinery sector reported that orders from the semiconductor, electronics, and government sectors have doubled, and delivery times have also doubled. They explained that the combination of supply chain lead times and price pressures has nearly doubled their factory order backlogs.

In the metalworking sector, while orders are secured at levels exceeding expectations until the end of the year, serious labor shortages are limiting production expansion. Steel supply shortages were also identified as a factor causing production delays.

Another respondent in the machinery sector stated that high interest rates are slowing the growth of new construction projects. Increased demand for artificial intelligence (AI) and data centers is also putting pressure on steel production capacity in the U.S., and rising steel prices are increasing the costs of raw materials and finished products.

Five of Six Major Manufacturing Sectors Expanding

According to ISM, among the manufacturing sectors surveyed in September, 12 sectors showed growth.

Electrical equipment, appliances, and components, non-metallic mineral products, primary metals, plastic and rubber products, computers and electronics, metalworking, furniture and related products, food, beverages, and tobacco products, transportation equipment, machinery, other manufacturing, and chemicals all showed growth.

Printing and related support activities and textile mills contracted.

Among the six major manufacturing sectors, five sectors—computers and electronics, food, beverages, and tobacco products, transportation equipment, machinery, and chemicals—expanded.

ISM reported that a sector corresponding to 2% of manufacturing GDP contracted in September. This was a significant decrease from 22% in August. The proportion of strong contraction, where the overall PMI is below 45%, remained at 2% of manufacturing GDP, the same as the previous month.

According to ISM, when the manufacturing PMI exceeds 47.5% for a certain period, it generally indicates expansion in the overall U.S. economy. Chair Spence explained that the September PMI of 54.5% corresponds to an annualized real GDP increase of 2.4%.

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