ISM Manufacturing Index Climbs to 55.5 in October
By TopHolding Editorial · Sunday, November 1, 2026 at 7:00 PM
First Trust economists report that the ISM Manufacturing Index climbed to 55.5 in October, led by rising production, healthy demand, and ongoing expansion across key industrial sectors.
According to Nate Gerze, CFA, Economist, Brian S. Wesbury, Chief Economist and Robert Stein, CFA, Dep. Chief Economist at First Trust Portfolios, U.S. factory activity strengthened in October as key demand and output metrics expanded. The ISM Manufacturing Index increased to 55.5 in October, exceeding the consensus forecast of 54.5 and signaling expansion for the tenth consecutive month. First Trust observes that the manufacturing sector is benefiting from capital investment tied to artificial intelligence, the reshoring of domestic production, and increased defense procurement.
The report details widespread gains, with twelve of eighteen surveyed industries expanding during the month. Production accelerated to 59.0 from 56.7 in September, marking its fastest pace since late 2021. New orders rose to 55.5, matching the headline index at a three-month high. First Trust's economists highlight that surging activity in semiconductors and government defense, particularly within machinery, has driven the rebound in orders and supported backlogs, which stood at 54.6 in October. They also point to hiring as a key positive takeaway, noting that the employment gauge remained in growth territory at 52.4 despite edging down from 52.7.
However, the team emphasizes that inflationary pressures remain an ongoing challenge for producers. The prices paid index slipped to 75.2 from 77.9 in September, which the analysts view as still elevated. First Trust attributes these persistent input costs to pricier steel and aluminum, import tariffs, and rising petroleum costs stemming from conflict in the Middle East. Based on these persistent cost pressures, First Trust expects the Federal Reserve to implement an interest rate increase in December, though they argue that slowing M2 money supply growth will eventually cool broader inflation faster than markets anticipate.
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Key terms
1. ISM Manufacturing Index: A monthly survey-based economic indicator tracking activity in the United States manufacturing sector, where readings above 50 indicate expansion and readings below 50 reflect contraction.
2. M2 Money Supply: A measure of the total volume of currency and liquid financial assets held across the economy, including cash, checking deposits, savings accounts, and money market funds.
Source: Nate Gerze, CFA, Economist, Brian S. Wesbury, Chief Economist and Robert Stein, CFA, Dep. Chief Economist, First Trust Portfolios — Data Watch. Read the original at ftportfolios.com.
