Manufacturing PMI Update: Is the Factory Sector Growing or Shrinking?

October 8, 2026 | ATN Trade & Finance

September's PMI data tells a split story across North America: US factories are expanding at a solid pace, Canada is cooling under tariff pressure, and Mexico is barely holding above the contraction line. Globally, the picture is the strongest it has been in years.

United States: Growing — and Prices Are Surging

The ISM Manufacturing PMI came in at 54.5% for September 2026, down just 0.1 points from August's 54.6%. Any reading above 50 signals expansion, and US manufacturing has now expanded for nine consecutive months, after four straight months of contraction earlier this year. ISM survey director Susan Spence noted the reading corresponds to approximately 2.4% annualized real GDP growth.

The demand picture is strong. New Orders rose 1.6 points to 55.3% — their ninth straight month of expansion. The Backlog of Orders jumped 4.6 points to 56.4%, signalling that factories are taking on more work than they can immediately process. Employment climbed 1.5 points to 52.7%, still in growth territory.

The warning signal is prices. The Prices Paid index surged 6.8 points to 77.9% — one of the highest readings in years — driven by steel and aluminum costs, tariffs, and petroleum-based products tied to the Middle East conflict. Supplier Deliveries slowed for the tenth consecutive month (59%), reflecting persistent logistics constraints. New Export Orders slipped 2.3 points to 50.9%, dangerously close to the contraction threshold. Notably, 60% of respondent commentary was negative in September, even as the headline remains firmly in expansion — a sign that manufacturers are growing despite conditions rather than because of them.

Canada: Expanding, but Slowing Fast

Canada's S&P Global Manufacturing PMI fell to 51.5 in September from 53.0 in August — its lowest reading since March and a six-month low. The sector is still growing, but the direction of travel is downward.

New orders slipped below 50 for the first time since March — meaning demand contracted in September. Output eased to 50.8 from 52.8. Forward-looking confidence fell sharply: the Future Output index dropped to 54.6, its lowest since December 2025. Input costs jumped to 71.1 — the highest since July 2022 — as tariffs and energy prices compound each other. Delivery delays were the most widespread since August 2022.

S&P Global economics director Paul Smith described the sector as showing "resilience despite several headwinds," but added that "tariffs and elevated global energy prices due to the war in Iran continued to have a damaging impact on the sector." The September 8 Canadian counter-tariffs and the US import bans on alcohol, dairy, and motorcycles that took effect later that month are not yet fully reflected in this data — October's reading will begin to capture their real cost.

Mexico: Barely Positive, Structurally Weak

Mexico's S&P Global Manufacturing PMI rose marginally to 50.3 in September from 49.8 in August, crossing back above the 50.0 expansion threshold — but only just. Economists described the picture as "still quite fragile."

The details are sobering. Output fell for the 27th consecutive month, though the rate of decline eased. Export orders fell for a third straight month, with softer demand from both Europe and the US. Employment declined, with firms cutting temporary and auxiliary staff. Supplier delivery times lengthened at the fastest pace in four years — partly due to highway blockades, security issues, and Middle East-related shipping disruptions. The IMEF manufacturing survey, a separate measure, rose only to 50.0 — exactly flat.

One brighter note: business confidence reached its highest level since November 2025, suggesting manufacturers see eventual improvement, even if current conditions remain difficult.

Global: A 55-Month High

Stepping back to the global view, the J.P. Morgan Global Manufacturing PMI hit 53.0 in September — a 55-month high and the fourteenth straight month of expansion. Output rose at the fastest pace since July 2021, new orders posted their steepest gain in 55 months, and employment growth reached a 52-month high. The standout performers were India, Taiwan, Ireland, the Netherlands, and the US, while China posted one of its strongest readings since the pandemic. Japan expanded modestly.

What this means for importers, exporters and supply chain managers: The US factory engine is running hot on demand but is being squeezed on costs — the 77.9% Prices Paid reading will flow through to finished goods prices in the months ahead. For Canadian suppliers to the US market, the new-orders contraction in September is a leading indicator of revenue pressure; October data will show whether the September 29 import bans caused further deterioration. Mexico's marginal return to expansion masks 27 consecutive months of output contraction — a structural problem that USMCA renegotiation uncertainty is unlikely to solve quickly. The global 55-month high is encouraging context, but North American businesses should not expect regional tailwinds to offset local tariff headwinds.

Sources:

Manufacturing PMI Update: Is the Factory Sector Growing or Shrinking?

Manufacturing PMI Update: Is the Factory Sector Growing or Shrinking?

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