U.S. manufacturing expanded for the ninth consecutive month in September, with the Institute for Supply Management's Purchasing Managers' Index registering 54.5%, just 0.1 percentage point below August, according to ISM's report published Oct. 1, 2026. The broader economy grew for the 23rd consecutive month. A parallel gauge, the S&P Global U.S. Manufacturing PMI, came in at 55.9, up two points from August.

The headline expansion, however, carried a sharp inflation signal for distributors and their customers. ISM's Prices Index jumped 6.8 percentage points to 77.9%, from 71.1% in August — a reading that points directly at gross-margin pressure and rising replacement costs across the supply chain.

Susan Spence, chair of ISM's Manufacturing Business Survey Committee, flagged the acceleration. "The most recent surge in price growth has renewed my concern about price volatility," she said during a media call Thursday. "Trade wars, chaos, whatever you care to call it, is really what's affecting inflation."

What do the sub-indexes show?

Demand held up. The New Orders Index rose 1.6 percentage points to 55.3%, its ninth consecutive month of expansion after four straight contractions. The Backlog of Orders Index climbed 4.6 points to 56.4%. Production slowed slightly, registering 56.7%, down 1.6 points from August.

Supply-side indicators carried mixed implications for inventory management:

• Supplier Deliveries: 59%, down 0.3 point — deliveries slowed for the 10th straight month (above 50% means slower).
• Inventories: 48.6%, down 2 points from August, indicating contraction.
• Customers' Inventories: 41.6%, down 1.2 points — "too low" territory, which ISM views as positive for future production.
• Employment: 52.7%, up 1.5 points from August's 51.2%.

Export demand softened. New Export Orders fell 2.3 points to 50.9%, and the Imports Index slipped 1.5 points to 51%.

Five of the six largest manufacturing industries expanded: computer and electronic products; food, beverage and tobacco products; transportation equipment; machinery; and chemical products.

How bad is the sentiment problem?

Measured against the hard numbers, sentiment deteriorated. Of comments submitted to ISM in September, 60% were negative versus 40% positive — a 1-to-1.6 ratio. Among the negative comments, 46% cited pricing volatility, 34% tariffs, 30% the Iran war and 21% increasing lead times.

Spence called sentiment "certainly worrisome," pointing specifically to new Trump administration tariffs on Canada and Ottawa's retaliatory measures on steel and aluminum.

Respondents in distribution-intensive verticals gave concrete accounts of the strain. "The U.S. tariff schedule is providing challenges," said one respondent in computer and electronic products, citing the search for supply sources outside China, local pushback on U.S. data centers and continuing component shortages.

A machinery-sector respondent reported a stark divergence: "Orders have doubled yet again, and delivery times have also doubled, in the semiconductor, electronics and government sectors, with remaining sectors flat to down. Coupled with supply chain lead times and pricing pressures, the factory backlog has nearly doubled. Canada tariffs have impacted cross-border costs and left our supply chain team scrambling."

A transportation equipment respondent described deferred capital spending as customers wait for cost and demand clarity: "Buying continues to get pushed out indefinitely. The only thing that is predictable is the chaos that is created by these trade policies."

Spence also noted choppy month-to-month patterns beneath the expansion. "Since June, new orders have been in this up-down pattern, up one month and down the next," she said, adding that employment showed "the same up-down pattern — not steady in either direction."

For distributors, the September data points to a channel running hotter on costs and lead times even as order books hold: slower supplier deliveries for a 10th month, a 77.9% Prices Index, customer inventories running low and backlog building. Whether that backlog converts into sustained shipments or stalls on deferred capital spending will depend largely on how the U.S.-Canada tariff conflict and input price volatility resolve in the months ahead.