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

October 21, 2026 | ATN Trade & Finance

The short answer: growing, but with significant cost pressure building. The most recent data from the US, Canada, and Mexico collectively show an industrial sector that has expanded for the better part of a year — driven by AI-related capital investment, defense procurement, and reshoring — while absorbing some of the most aggressive input price inflation since the 2021–2022 supply shock. The October flash PMI for the US releases Friday, October 23; here is what the September numbers show going in.

United States: Nine Months of Expansion, Prices Surging

The ISM Manufacturing PMI came in at 54.5% in September 2026 — fractionally below August's 54.6% but the ninth consecutive month of expansion and, per ISM, the third-fastest growth pace since 2022. The S&P Global final manufacturing PMI for September confirmed at 55.9, down slightly from the 57.0 flash reading but still firmly expansionary.

Inside the September ISM report, the demand picture was broadly positive: New Orders rose to 55.3 from 53.7, and the Backlog of Orders jumped to 56.4 — a seven-month high that signals forward production commitments are building. Employment held at 52.7, its third consecutive month in expansion, with hiring comments outnumbering reductions at a 1.5-to-1 ratio. Production grew for an 11th straight month at 56.7, though the pace slowed from August's 58.3.

The dark spot was prices. Prices Paid surged to 77.9 from 71.1 in August — a 6.8-point jump that brought input cost inflation close to levels last seen at the start of the Iran war. ISM respondents directly attributed the spike to steel and aluminum tariffs, petroleum-based product costs linked to the Middle East conflict, and supply chain delays. Among 18 manufacturing industries tracked by ISM, 12 expanded and just two contracted (Printing and Textile Mills). Commodities in short supply included electrical components, electronic components, memory chips, and steel.

Globally, the J.P. Morgan/S&P Global Manufacturing PMI reached 53.0 in September — a 55-month high, with 14 consecutive months of expansion. Manufacturing output grew at its fastest pace since July 2021, and new export orders rose at the quickest rate in over five years.

Canada: Expansion at Risk

Canada's manufacturing sector had been in expansion for five consecutive months through August, with the S&P Global PMI at 53.0 — solid output growth, accelerating new orders from domestic buyers, and the strongest employment gains since October 2024. But S&P Global economist Paul Smith flagged that August may have been a "high-water mark": the collapse of US-Canada trade talks, followed by the imposition of 50% Section 338 tariffs in late August and Canada's own retaliatory duties taking effect September 8, creates material downside risk. Export orders had already fallen for three straight months through August. September data is not yet published; the next Canada PMI release will provide the first hard read on how tariff escalation hit the factory floor.

Mexico: Just Above Contraction, Structurally Fragile

Mexico's manufacturing sector barely returned to expansion in September. The S&P Global Mexico Manufacturing PMI came in at 50.3 — up from 49.8 in August, but a reading S&P Global described as "still quite fragile." Output fell for a 27th consecutive month; the headline improved partly because supplier delivery times worsened sharply (the fourth-worst reading in four years), and longer delivery times mechanically lift the PMI. Export orders fell for a third consecutive month. Around 36% of panel firms reported higher input costs, citing tariffs, the oil crisis, geopolitical tensions, and exchange rate pressure. Business confidence hit its highest level since November 2025 but remained below its long-run average.

What to Watch Friday

The S&P Global Flash US Manufacturing PMI for October releases on Friday, October 23. Consensus expectations point to a modest reading around the mid-50s. The key variables to watch are whether the Prices Paid spike in the ISM September report extends into October, and whether new export orders — which had been slipping — stabilize as the earnings season so far suggests corporate demand remains intact.

What this means: North American manufacturing is growing but the growth is uneven and expensive. The US is the engine — nine months of ISM expansion backed by defense, reshoring, and AI capital spending — but the cost side is deteriorating fast, with Prices Paid near war-driven highs. Canada faces a genuine inflection: the tariff war arrived too late to show up in the August data, and the September reading will be the first real signal. Mexico is barely positive and is carrying 27 months of consecutive output contraction underneath a headline that owes more to supply disruption than demand.

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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