U.S. ISM Manufacturing Index (September 2025)
Vikram Rai, Senior Economist | 416-923-1692
Date Published: October 1, 2025
- Category:
- U.S.
- Data Commentary
- Commodities & Industry
ISM Manufacturing Index Shows Seventh Consecutive Month of Contraction
- The ISM Manufacturing Index rose to 49.1 in September, up from 48.7 in August, but remaining in contractionary territory.
- Only five of 18 industries reported growth last month, down from seven in August. Similar to August, roughly 70% of manufacturing GDP contracted in September.
- Demand conditions worsened in September, after showing signs of turning a corner in August. The new orders index fell 2.5 points to 48.9, reversing a short-lived trip into expansionary territory in August. The new export orders index fell by 3.6 points to 43.0, also reversing an uptick in the month prior.
- The production index entered expansionary territory, increasing to 51.0 from 47.8, but the employment index remained in contractionary territory.
- Price gains decelerated in September, coming in at 61.9 vs. 63.7 in August. However, the prices index continued to fluctuate near a three-year high.
Key Implications
- Manufacturing activity contracted at a slower pace in September as domestic demand expanded, the decline in foreign demand slowed, and expectations for lower interest rates increased. The details of the report clearly show stagnation in the manufacturing sector, but as a small silver living, we may be seeing less stagflation. The production index entered expansionary territory, and the prices index pointed to slower, but still increasing, price pressures. If this is a sign of moderating price pressures accompanied by economic weakness, it simplifies the decision-making of the Federal Reserve.
- Sentiment relayed by survey respondents continued to be negative and points to broad expectations that the weakness in the index will persist for some time. Several comments pointed to a large impact from tariffs, such as products being held at the border and tariffs pushing up their costs. Others point to tariffs as dragging down customer orders and leading to flat revenue expectations for the year. Without a major change in the economic environment, it seems likely that the contraction in manufacturing will be continuing.
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