---
title: US Factory Output Grows at Its Fastest Pace Since 2021 as Manufacturers Cite AI and Defense Demand
description: The ISM manufacturing PMI rose to 55.5% in October as output hit its fastest pace since 2021, while AI demand left memory and parts scarce and costly.
author: Darie Nani (Editor-in-Chief)
date: 2026-11-07T13:26:43.220Z
updated: 2026-11-07T13:26:43.238Z
canonical: https://www.sovereignmagazine.com/article/ism-manufacturing-pmi-october-2026-factory-output
image: https://cdn.nanimediahouse.com/pexels-workers-operating-machinery-in-a-manufacturing-factory-in-ko-29224559.jpg
categories: Economy
content_type: News
region: United States
publication: Sovereign Magazine
schema_type: Article
---

US factories raised output in October at the fastest rate in almost five years, purchasing managers told the Institute for Supply Management (ISM). Machinery makers tied their demand to data centers, semiconductors, defense work, mining and the replacement of municipal water systems.

ISM's Production Index rose 2.3 points to 59 percent, its highest reading since November 2021. The ISM manufacturing PMI climbed to 55.5 percent from 54.5 percent in September. October was the 10th straight month of expansion for the US manufacturing PMI, after 10 months of contraction that ended with a reading of 47.9 percent in December 2025. Susan Spence, who chairs ISM's Manufacturing Business Survey Committee, said that going by the index's past relationship with the wider economy, the October reading corresponds to about 2.7 percent annualized growth in real gross domestic product.

Five of the six largest manufacturing industries grew in October: machinery, computer and electronic products, transportation equipment, chemical products, and food, beverage and tobacco. Purchasing managers' comments about output specifically ran two positive to one negative, up from 1.6 to one in September.

## Manufacturers Report Shortages of Memory and Electronic Parts Used in AI Data Centers

A machinery respondent described "explosive growth in the semiconductor and government/defense spaces" that "has put us on our heels." The global supply chain seems to be in similar straits, the respondent said, and some items now carry delays not seen since the pandemic: "four weeks is now 50 weeks; a US$2,000 item six months ago is now $4,000. We are hand-to-mouth." Its customers, the respondent added, "are breaking down the doors complaining about our delivery delays."

"Any commodity consumed by AI/data centers is in a crunch, both for supply and pricing," a respondent in miscellaneous manufacturing told ISM. Memory has been on ISM's list of commodities in short supply for 10 consecutive months, electronic components for 20 and copper for four. SK hynix has said the [memory chip shortage will last through 2030](https://www.sovereignmagazine.com/article/how-long-will-the-memory-shortage-last).

Suppliers took longer to deliver for the 11th month in a row, according to ISM. Manufacturers' average lead time for production materials rose three days to 87 days. For capital equipment it stayed close to six months, at 175 days.

## Raw Material Prices Rose for a 25th Straight Month

ISM's Prices Index fell 2.7 points to 75.2 percent, the 25th consecutive month in which raw material prices rose. Just over half of respondents, 53.1 percent, reported paying higher prices, down from 58.6 percent in September, and no industry reported paying less. Spence said three things are still pushing prices up: higher steel and aluminum prices that affect the entire value chain, tariffs on many imported goods, and higher prices for petroleum-based products because of the Middle East conflict. Copper has been on ISM's list of commodities rising in price for 16 straight months.

A fabricated metal products maker said "Canadian tariffs continue to damage small U.S. businesses selling into that important market." A chemical products maker said it normally assumes 2 to 3 percent inflation a year and usually keeps its cost increases under 2 percent. "This year, costs are up more than 6 percent, and we are not doing much to keep any of the spend categories under the target," the respondent said. Sales have been "OK," the respondent added. "It won't be a great year."

## Purchasing Managers Grew More Pessimistic as New Orders Barely Rose and Hiring Slowed

Across all topics, purchasing managers' sentiment worsened for a third month in a row, ISM said. Sixty-six percent of their comments were negative and 34 percent positive. Of the negative comments, 62 percent mentioned pricing volatility, 41 percent longer lead times, 25 percent tariffs and 21 percent the Iran war, and most mentioned more than one.

ISM's New Orders Index rose only 0.2 point, to 55.5 percent. Order backlogs grew more slowly, with that index down 1.8 points to 54.6 percent, and the Employment Index slipped 0.3 point to 52.4 percent. ISM said 6 percent of manufacturing GDP was in strong contraction in October, which it defines as a PMI of 45 percent or lower, up from 2 percent in September.

A transportation equipment respondent said customers remain in "wait-and-see mode" and are "gobsmacked by the high price of equipment when they ask for quotes." "Typically, we see a fourth-quarter bump as customers use up end-of-year budgets," the respondent said. "This year, that bump does not exist."

ISM publishes its November figures on December 1.

## FAQ

**Q: What does a manufacturing PMI reading above 50 mean?**
A reading above 50 percent means the manufacturing sector is generally expanding, and a reading below 50 means it is generally contracting. ISM also says that a PMI above 47.5 percent over a period of time generally means the overall economy is expanding. By that measure, ISM counts October as the 24th straight month of growth in the wider US economy.

**Q: Does a high Supplier Deliveries reading mean deliveries are getting faster?**
No. Supplier Deliveries is the only inverted index in ISM's PMI reports, so a reading above 50 percent means deliveries are getting slower. The index was 59.1 percent in October, up from 59 percent. ISM says slower deliveries are typical when the economy improves and customer demand rises.

**Q: What does it mean that customers' inventories are "too low"?**
ISM asks manufacturers whether their customers hold too much, about the right amount, or too little of their products. The Customers' Inventories Index stayed at 41.6 percent in October, which counts as too low, and ISM says that is usually considered positive for future production. Eleven industries reported their customers' inventories as too low, and none reported them as too high.

**Q: Which manufacturing industries shrank in October?**
Three of the 18 industries ISM tracks reported contraction: printing and related support activities, paper products, and nonmetallic mineral products. Twelve industries reported growth; plastics and rubber products grew fastest, followed by electrical equipment, appliances and components.