U.S. manufacturing growth eases in October as inflationary pressures intensify

U.S. manufacturing continued to expand in October, with production and new orders rising for another month and employment growth reaching a five-and-a-half-year high. However, intensifying cost pressures and persistent supply chain disruption presented fresh challenges for manufacturers.

The latest S&P Global U.S. Manufacturing PMI recorded 54.9 in October, down from September’s 55.9, which had marked a 52-month high. Although the headline index indicated a slight moderation in the pace of expansion, it remained comfortably above the 50.0 threshold separating growth from contraction for the 15th consecutive month.

Output increased for the 17th successive month, supported by stronger new orders. However, both production and new business recorded slower rates of growth than in September, with new orders expanding at their slowest pace since March. Demand nevertheless remained solid, while international sales stabilised. New export business rose fractionally for the first time since June 2025, although gains were limited by tariffs.

Employment growth reaches five-and-a-half-year high

Despite some moderation in output and new orders, manufacturers continued to increase staffing levels as businesses responded to rising workloads and mounting pressure on production capacity. Backlogs of work increased for an eighth consecutive month, with the latest rise the steepest since April, when growth in outstanding business reached a near four-year peak.

In response, manufacturers expanded their workforces at the fastest pace since April 2021, highlighting continued confidence in the sector’s near-term prospects.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said the sector was sustaining its strongest period of growth since early 2022. However, he warned that manufacturers were experiencing growing pains as demand, particularly for AI-related goods and equipment, outstripped supply.

Supply chain disruption drives inflation higher

Rising input costs and worsening supplier delivery times remained significant headwinds for the sector.

Input price inflation accelerated in October, reaching its highest level since May and remaining well above its historical trend. Manufacturers reported increases in energy, fuel and transportation expenses, while tariffs and higher prices for metals, including aluminium and steel, added to cost pressures.

At the same time, suppliers struggled to keep pace with demand, particularly for products associated with AI data centre construction. Disruption linked to shipping and logistics, alongside the conflict in the Middle East, further constrained supply.

Average supplier delivery times deteriorated to their greatest extent since August 2022, with delays occurring at a historically elevated pace.

With manufacturers facing higher purchasing costs and limited availability of inputs, many responded by increasing their own selling prices. Output price inflation consequently accelerated to its highest level since September 2022.

Williamson warned that the increase in factory-gate prices would inevitably feed through to consumers in the coming months, potentially keeping inflation above the Federal Reserve’s target and adding to pressure on policymakers to raise interest rates further.

Manufacturers also increased purchasing activity for a tenth consecutive month, seeking to secure supplies and lock in prices where possible. Input inventories recorded modest growth for a seventh successive month.

Manufacturers remain optimistic about outlook

Despite the challenges surrounding costs, tariffs and supply chain availability, manufacturers remained confident about the sector’s prospects over the next 12 months.

Indeed, business confidence improved from September to a level broadly in line with its historical trend, with companies anticipating higher production and expressing optimism about a potential recovery in market demand.

Positive business expansion plans also pointed to continued willingness to invest, although wider global economic uncertainty and trade-related headwinds remained concerns.