US Manufacturing PMIs
The seasonally adjusted S&P Global US Manufacturing Purchasing Managers’ Index™ (PMI®) surged higher in September, posting 55.9, up from 53.9 in August. Recording well above the critical 50.0 no-change mark, the latest reading was the strongest since May 2022. Growth has now been registered every month since August 2025.
All five PMI components supported the uplift in the headline index. Most notably, output and new orders registered faster rates of growth. Panelists commented on a broad-based uplift in demand, with government and tech-related industries mentioned as sources of higher sales, with latest data indicating the best rise in sales since April 2026 and the second-strongest since May 2022. Firms responded by increasing their production sharply to extend the current run of output growth to 16 months.
Once again, it was the domestic market that underpinned demand growth as new export orders fell for the fifteenth successive month. Panelists reported that tariffs and elevated shipping costs had dampened international sales.
Strong growth in overall sales and production encouraged companies to take on additional staff in September. The net increase in jobs was the highest in over five years as firms scrambled to expand capacity and deal with the influx of new work and existing workloads.
However, there were several reports of difficulties in securing suitable labor, and this was a factor that led to another rise in work outstanding. Overall, backlogs of unfinished orders rose for a seventh successive month and to the greatest degree since April.
Manufacturers also reported that input delivery delays had contributed to backlog growth. Indeed, latest data showed typical vendor lead times lengthening to the greatest degree since August 2022. There were reports of widespread stock shortages at suppliers, with a swathe of products reportedly hard to source, especially steel and electronics-related items. Shipping challenges across global maritime routes, plus customs delays (especially at the Canadian border) added to supply-side pressure.
The short supply of inputs, tariffs and the war in Iran all served to push up manufacturing input costs at a faster rate than in August. Alongside metals and electronics, firms widely reported increased energy and fuel prices. In response, manufacturers raised their own charges steeply albeit to the weakest degree since February.
Despite rising inflationary pressures, and ongoing supply-side challenges, manufacturers are confident the recent upswings in production and new orders can be sustained. Indeed, confidence in the outlook remained positive (albeit a little below its historical trend), with firms linking their optimism to positive order book pipelines, and expectations for market, product and commercial expansion. Some firms also hope for greater stability in the business environment and a drop in energy prices.
Reflective of positive production and sales forecasts, companies sought to build inventories of inputs and finished goods. Purchasing activity rose markedly, expanding at an above-trend pace that was the fastest since June. Despite supply-side delays, and a strong uplift in production needs, the rise in purchasing activity helped to drive stocks of purchases higher for the sixth successive month.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence:
“Order book backlogs are rising and suppliers are increasingly busy, pointing to stretched capacity as companies struggle to meet demand across both consumer-facing and business sectors. This is most notable in the investment and production of machinery and equipment, linked in many cases to rising AI-related spend.”
- ISM:
“The Manufacturing PMI® registered 54.5 percent in September, 0.1 percentage point below the August figure of 54.6 percent. The overall economy continued in expansion for the 23rd month in a row. (A Manufacturing PMI® above 47.5 percent, over a period of time, generally indicates an expansion of the overall economy.)
The New Orders Index expanded for the ninth consecutive month after four straight readings in contraction, registering 55.3 percent, up 1.6 percentage points compared to August’s figure of 53.7 percent. (…)
The Prices Index remained in expansion (or ‘increasing’ territory), registering 77.9 percent, a notable increase of 6.8 percentage points compared to August’s reading of 71.1 percent.
The Backlog of Orders Index registered 56.4 percent, up 4.6 percentage points compared to the 51.8 percent recorded in August.
The Employment Index reading of 52.7 percent is up 1.5 percentage points from August’s figure of 51.2 percent,” says Spence. (…)
“The New Export Orders Index lost 2.3 percentage points in September for a reading of 50.9 percent versus 53.2 percent in August. (…)
“In September, three of four demand indicators (the New Orders, Backlog of Orders and New Export Orders indexes) remained in expansion, and the Customers’ Inventories Index remained in ‘too low’ territory, contracting at a faster rate. A ‘too low’ status for the Customers’ Inventories Index is usually considered positive for future production.
“Regarding output, the Production Index expanded for the 11th month in a row, with the positive-to-negative comment ratio dropping again in September (1.6 positive comments for every negative one, compared to a 2.2-to-1 ratio in August and 3.3-to-1 in July). The Employment Index remained in expansion and gained 1.5 percentage points. The positive-to-negative comments ratio on Employment was 1.5-to-1 in September.
“Finally, inputs (defined as supplier deliveries, inventories, prices and imports) were mixed, with the Supplier Deliveries Index decreasing 0.3 percentage point, the Inventories Index declining another 2 percentage points and returning to contraction, and the Prices Index increasing 6.8 percentage points, returning to its level at the start of the Iran War. The Imports Index lost 1.5 percentage points, to 51 percent versus 52.5 percent in August. (…)
Some comments:
- “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 — those supply chains took years to develop and nurture — hurting the very lead times government buyers are concerned about.” [Machinery]
- “Order levels remain strong and elevated; we have orders through year-end at above forecast levels. Our biggest challenge continues to be a severe shortage of workers, limiting our production output to meet demand. The second challenge is general availability of steel; the market is getting worse, and more production delays are expected as we gap out of needed material.” [Fabricated Metal Products]
- “Raw metals continue to be challenging, especially with the uncertain nature of tariffs being on and off again. New tariffs against Canada have drastically increased costs for capital expenses as well as assemblies.” [Electrical Equipment, Appliances & Components]
- “Higher interest rates slow down the growth of new construction projects; we also have to face up to the higher cost of components from overseas due to tariffs and freight rates. Due to booming demand of AI and data centers, domestic steel capacity has been stretched and pushed. Higher steel costs each month increase our raw-material and finished-goods costs.” [Machinery]
- “Every month, we are faced with new headwinds created by this administration. This month, it is the trade war with Canada, which every day is getting worse — causing prices to go up and uncertainty that creates massive disruption. Buying continues to get pushed out indefinitely as customers don’t want to spend on capital expenditures until there is more certainty of costs and demand. The only thing that is predictable is the chaos that is created by these trade policies.” [Transportation Equipment]
Ed Yardeni:
(…) The upswing is being fueled by the AI capex boom, reshoring, and stronger incentives for domestic investment, including immediate expensing under the OBBBA.
Meanwhile, input cost pressures remained elevated in September. The ISM prices-paid index rose to 77.9, near its highest level since 2022, while regional Fed price surveys also remained high (chart).
Respondent comments in the ISM survey noted that demand remains strong in semiconductors, electronics, machinery, and AI/data-center-related markets, but that strength is increasingly running up against worker shortages, stretched steel capacity, longer lead times, and rising input costs.
The amount spent on the construction of data centers spiked by another 7.5% in August from July, and by 73% year-over-year to a seasonally adjusted annual rate of $85 billion, according to construction data from the Census Bureau today. Since the beginning of 2021, the annual rate of construction spending on data centers has spiked by 823%.
These amounts only reflect the construction costs of the buildings, the improvements around the buildings, and the equipment integrated into the buildings, such as HVAC systems. But that’s the cheap part of a data center.
Not included here is the expensive part: equipping the completed data center buildings with servers and racks, with electronic and optical equipment to connect the servers to the internet, and with the electrical equipment that supplies the servers with prodigious amounts of power, including in many cases onsite diesel or gas-turbine power generators.
Canada Manufacturing PMI: Modest growth sustained in September but spike incost inflation
Canada’s manufacturing economy showed a degree of resilience in the face of several headwinds during September. Output rose and firms showed a willingness to backfill vacancies with skilled workers to support recent long-term contract wins.
However, tariffs and elevated global energy prices due to the war in Iran continued to have a damaging impact on the sector.
Input cost inflation accelerated to its highest level since July 2022, whilst supplier delivery times lengthened to a degree not seen in over four years. (…)
China: Manufacturing output expands at fastest pace in five months
The headline seasonally adjusted RatingDog China General Manufacturing Purchasing Managers’ Index™ (PMI) remained above the 50.0 no-change mark for the tenth consecutive month in September, indicating an improvement in the health of the manufacturing sector. At 52.1, up from 51.5 in August, the latest reading was the highest in five months and was positively influenced by all five sub-indices apart from the stocks of purchases component, which fell slightly.
An improvement in client demand, driven partly by interest among some companies in accumulating safety stock, had reportedly supported the latest expansion in overall new orders among Chinese manufacturers. This was accompanied by growth in new work from abroad amid reports of robust market conditions overseas. Notably, total new work rose at the fastest rate in five months, while the upturn in new export orders was the best seen since February, with both respective indices signalling solid growth overall.
Stronger inflows of new work led to a faster rise in Chinese manufacturing production in September. This marked the tenth consecutive month in which output had increased, with the rate of growth similar to that seen for new orders and solid. Among the three monitored sub-sectors, consumer goods makers recorded the strongest increases in new orders and output.
Outstanding workloads continued to accumulate at a steady pace among Chinese goods producers despite the expansion in production capacity. Subsequently, firms hired additional staff – both permanent and temporary – to cope with rising workloads. Though only slight, this marked the third time in four months that firms had raised their workforce numbers.
To meet rising production requirements, Chinese manufacturers continued to purchase additional inputs at the end of the third quarter. Anecdotal evidence also suggested that some companies were interested in accumulating additional inventory as part of safety stock building efforts. That said, supplier delays were again observed in September, which partly limited the pace at which input inventory stocks rose. Stocks of purchases nevertheless expanded for the tenth consecutive month, marking the longest run of growth since 2006–07.
Turning to prices, average cost burdens continued to rise among manufacturers during September. The rate of input price inflation was the strongest seen in four months and solid. According to firms, higher raw material prices, particularly for metals and oil, were the main drivers of inflation. As a result, Chinese manufacturers lifted their selling prices slightly in September, following a marginal reduction in August. Export charges likewise rose slightly.
Overall, sentiment in the Chinese manufacturing sector remained positive at the end of the third quarter of the year. Firms were generally optimistic that output would rise in the next 12 months amid expectations for better global macroeconomic conditions and the implementation of business development plans. Although still below the long-run average, the degree of confidence improved from August.
Euro area manufacturing expansion gathers pace in September
September has seen a further encouraging improvement in manufacturing growth across the eurozone, with the rising tide lifting all ships as the upturn has also broadened out to cover all surveyed member states.
Measured across the euro area, production is rising at a rate not seen for four and a half years as firms boost capacity to meet rising demand. Order book growth is also now sufficiently strong to encourage factories to take on additional staff, ending the continual loss of factory jobs that had been reported over the prior three years.
The upturn is being driven by rising demand for investment goods such as machinery and equipment, with output of these capital goods growing in September at a rate not seen since the post-COVID rebound five years ago. This reflects higher demand for AI and defence-related equipment in particular.
Demand for consumer goods continues to fall, however, with the increased cost of living acting as a drag on household spending. It’s therefore worrying to see both input costs and selling prices rising at increased rates again in September, which will fuel speculation about additional rate hikes from the ECB.
Japan: PMI slips to six-month low in September
The latest PMI survey data suggest that growth momentum softened across Japan’s manufacturing industry in September. Firms signalled slower increases in output and new orders, as some companies mentioned that clients were adjusting inventories as an earlier period of stock accumulation began to unwind.
Nevertheless, the survey was consistent with solid growth overall, and rounded off the best quarterly performance since Q1 2014.
Employment remained a particular bright spot, rising at the second-fastest rate since April 2018, as firms remained highly confident that production levels would continue to rise in the year ahead. This was often linked to upbeat forecasts for demand related to semiconductors and AI technology, new product launches and robust international demand.
Nevertheless, there were a number of potential headwinds that could temper performance including further supply chain disruption, component shortages and sharply rising costs.
While companies suggest that the worst of recent price rises may have passed, expenses continued to rise sharply overall at the end of the third quarter. As a result, manufacturers raised their selling prices at one of the sharpest rates recorded since late 2022.
ASEAN manufacturing growth remains solid but loses momentum in September
ASEAN manufacturing had a strong third quarter, regaining momentum after a relatively soft second quarter. Although the region continued to perform well in September, growth shifted down a gear.
Renewed tensions in the Middle East and the resulting rebound in oil prices have prompted manufacturers to temper their expectations for the year ahead.
Nonetheless, the sector’s continued strength helped revive hiring, while purchasing activity rose further. Part of this increase, however, reflected efforts by some firms to get ahead of potential raw material shortages and subsequent price hikes. Although the road ahead remains difficult to assess, given heightened geopolitical uncertainty, ASEAN manufacturers are more than holding their ground for now.
U.S.: Inflation too broad-based
Several observers certainly breathed a sigh of relief when the U.S. inflation data were released yesterday, as methodological revisions resulted in figures that were much lower than expected, both for the headline PCE and the core PCE.
Changes in how prices for computer software and accessories, portfolio-management fees, and legal services are compiled indeed lowered annual core inflation by no less than 36 basis points—significantly more than economists had anticipated—leaving this measure three tenths of a percentage point below consensus expectations (3.0% vs. 3.3%).
The revision also helped narrow the gap that had recently widened between core inflation as calculated by the PCE and the CPI, bringing it down from 0.9% in July to 0.6% in August.
Although welcome, this revision has not fundamentally altered our view of the inflation outlook in the United States. With domestic demand still being fueled by the AI investment boom, we believe it will be difficult to bring inflation back to target without multiple rate hikes by the Fed. Labour market tightness is another factor to consider, as any acceleration in wage growth would threaten to intensify price pressures in the services sector.
But more fundamentally, it is the highly widespread nature of current inflation that leads us to believe further rate hikes are likely. As shown in today’s Hot Chart, the proportion of PCE components with an annual growth rate exceeding 3%—an indicator frequently cited by Fed Chairman Kevin Warsh—remains well above its long-term average (51.3% versus 35.3%). The same is true for components rising at a rate above the central bank’s 2% target (64.8% vs. 50.3%).
These two measures suggest that price pressures are currently not limited to the components most directly affected by the crisis in the Middle East. In an economy that continues to grow at a rate above its potential, demand-driven inflation is also a factor and will be more difficult to curb, especially after five years of inflation above the 2% target.
Rising Yields Are Wreaking Havoc on Stocks Outside the AI Trade
After the 10-year Treasury yield rose as high as 5.34% for the first time since 2002, stock traders are fiercely debating when the selloff in bonds will start to trigger pain for a resilient US stock market.
Under the surface, however, the spike in rates is already wreaking havoc.
While the S&P 500 Index is less than 2% from a record, everything from interest-rate sensitive small-cap stocks to banks and utility companies are getting battered. And many of the most speculative corners of the market — like unprofitable technology companies and those with the weakest balance sheets — trail the equity benchmark since the Federal Reserve hiked interest rates last month for the first time in three years to cool inflation.
“Most parts of the market are at least 5% off their highs, let alone segments of the market that are down 15-plus percent,” Dan Suzuki, global investment strategist at iCapital, told Bloomberg TV. “A lot of that has to do with the higher interest rates and the tightening of financial conditions that comes along with that.”
It’s a unique moment for the US stock market, which is being held aloft at the index level by the artificial-intelligence trade while at the same time staring down the type of circumstances — from mounting geopolitical risks to rising interest rates and US midterm election uncertainty — that historically have led to turbulent markets. (…)
E.G.:
- The S&P 500 Equal-Weight Index is down 6.0% from its Aug. 14 peak.
- The median stock is down -17%.
- 204 companies, or over 40% of the index, are more than -20% below.
- The Russell 2000 Index is down 8.5%.
- The KBW Nasdaq Bank Index is down 12%.
- The S&P 500 Utilities Sector is down 17% since February.
- Citadel says that MSFT, NVDA, AAPL and META alone added about 300 points to the S&P in Q3, more than 200% of the index’s total gain. The other 499-ish stocks together subtracted about 150 points (Zerohedge)
Canada, EU plan to link next-gen payment systems, easing transactions
Canada and the European Union plan to link next-generation payment systems to enable faster cross-border transactions, according to a draft joint statement prepared for a summit between Ottawa and Brussels later this month.
This will help remove obstacles to business and investment between the two jurisdictions, according to the statement, an early version of a summit communiqué that was viewed by The Globe and Mail. It adds that the new partnership will be called an “Alliance for the Future.”
The draft statement doesn’t detail what next-generation payment systems include, but this term has been used by others to refer to a major upgrade of a country’s core payment infrastructure, usually built around real-time payments. The core infrastructure is a central set of systems that clear and settle payments between financial institutions.
Canada and the EU are working to modernize the electronic systems that their businesses and people use to move money from place to place.
Both have identified the United States’s sway over the current generation of payment systems as a risk, given that Washington has grown increasingly unpredictable and protectionist under President Donald Trump.
Earlier this month, Prime Minister Mark Carney identified a country’s control over payment systems as a feature of modern sovereignty. In an address to the European Parliament on Sept. 17, he said Canada and Europe should “secure our strategic autonomy” through co-operation in strategic capabilities including “critical minerals, defence industrial capacity, AI and compute, energy security, space, and payments.”
Mr. Carney is welcoming EU officials in Montreal at the end of October to begin to define a new relationship with Brussels – one that European Commission President Ursula von der Leyen has said could make Canada an “associate member” of the 27-country bloc. (…)
The U.S.’s power over international payments was demonstrated in 2025 when Mr. Trump imposed sanctions on Winnipeg-born International Criminal Court judge Kimberly Prost over her work on a case involving American troops in Afghanistan. The U.S. sanctions left Ms. Prost unable to use most credit cards or multinational services such as Amazon or airlines. (…)
The draft statement shows that Canada and the EU plan to announce that they’ve completed a Digital Trade Agreement “to allow for faster, lower-cost secure digital trade and transactions” and that they plan deeper co-operation on critical minerals.
It says Ottawa and Brussels plan to announce that Canada and the European Investment Bank have “completed negotiations of an agreement that will facilitate European Investment in critical Canadian resources, in particular, critical minerals.” (…)
Ottawa designated a proposed pipeline to the West Coast from Alberta a project of national interest on Thursday (…).
It marked the first official designation of a project of national interest under the Building Canada Act, which provides an accelerated pathway through regulatory approvals with the support of the federal government. (…)
Pacific Link is a key part of Mr. Carney’s suite of policy changes that aim to reset federal relations with Alberta and diversify Canadian exports away from the United States. It would carry one million barrels of oil a day to the coast, allowing Alberta oil to access more international markets and garner higher prices. (…)
Respectfully Yours!
Q: You said that Iran cannot have nuclear weapons. Why not? North Korea can have nuclear weapons.
Trump: Ahh because you had a different president. Kim Jong un. He’s a friend of mine. He likes Trump. I like him. As long as I’m around, he’s going to be fine. You know why? He respects me. (@Acyn via ZH)