Image Source: Pixabay
 

The manufacturing ISM continues to reek of mild stagflation.
 

ISM chart and excerpts below by permission from the Institute for Supply Management® ISM®
Note: Supplier Deliveries is the only ISM^® PMI^® Reports index that is inversed; a reading of above 50 percent indicates slower deliveries.

Please consider the October 2025 Manufacturing ISM^® Report On Business^® by Susan Spence, Chair of the Institute for Supply Management^®.

Economic activity in the manufacturing sector contracted in October for the eighth consecutive month, following a two-month expansion preceded by 26 straight months of contraction, say the nation’s supply executives in the latest ISM^® Manufacturing PMI^® Report.

“All of the four demand indicators (New Orders, New Export Orders, Backlog of Orders, and Customers’ Inventories indexes) improved, although they are still in contraction territory. The Customers’ Inventories Index contracted at a slower rate. 

“Looking at the manufacturing economy, 58 percent of the sector’s gross domestic product (GDP) contracted in October, down from 67 percent in September, however; the percent of GDP in strong contraction (registering a composite PMI^® of 45 percent or lower), is at 41 percent, up 13 percent from September. The share of sector GDP with a PMI^® at or below 45 percent is a good metric to gauge overall manufacturing weakness. Of the six largest manufacturing industries, only two (Food, Beverage & Tobacco Products; and Transportation Equipment) expanded in October,” says Spence.

What Respondents Are Saying

• “Business continues to remain difficult, as customers are cancelling and reducing orders due to uncertainty in the global economic environment and regarding the ever-changing tariff landscape.” (Chemical Products)
• “Decrease in domestic demand for finished products has resulted in slower manufacturing and an increase of raw material in inventory.” (Petroleum & Coal Products)
• “In general, business is really strained. Money is sitting tighter, and geopolitical changes add to the uncertainty/risk factor. Even medical fields are feeling the pressure.” (Miscellaneous Manufacturing)
• “Sales continue to underperform in our automotive OEM and industrial divisions. Our aerospace and automotive aftermarket are the only areas performing slightly above budget. This is the third month of lower-than-expected sales, and the remainder of the year outlook is not looking better. Sales are expected to be slightly less than in 2024.” (Fabricated Metal Products)
• “Tariffs continue to be a large impact to our business. The products we import are not readily manufactured in the U.S., so attempts to reshore have been unsuccessful. Overall, prices on all products have gone up, some significantly. We are trying to keep up with the wild fluctuations and pass along what costs we can to our customers.” (Machinery)
• “The commercial vehicle (CV) market remains depressed as customers continue to delay vehicle purchases. Uncertainty in price and transportation demand remains the center of attention. U.S. trade policy and reciprocal actions by China in the form of export controls on rare earths and semiconductors, as well as ocean freight carrier restrictions, have once again caused a lot of stress in supply lines. The CV industry is now bracing for the next round of tariffs focused on commercials vehicles, scheduled to begin on November 1.” (Transportation Equipment)
• “The tariff trade war has negatively impacted agricultural export markets, driving down demand and price. This negatively impacts farmer revenue and the likelihood of farmers investing in new equipment.” (Machinery)
• “The unpredictability of the tariff situation continues to cause havoc and uncertainty on future pricing/cost. But even with the tariffs, the cost to import in many cases is still more attractive than sourcing within the U.S. Challenges with tariffs on production equipment necessary for internal production makes it difficult to justify expansion of capacity.” (Computer & Electronic Products)
• “Volatility in some of our highly exposed commodity markets has tempered a bit, thanks to improved weather conditions and overall downward pressure on pricing. Tariffs continue to remain difficult to quantify, manage and deal with in general, since they continue to impact us day-to-day and our bottom line.” (Food, Beverage & Tobacco Products)
• “Wonder has turned to concern regarding how the tariff threats are affecting our business. Orders are down across most divisions, and we’ve lowered our financial expectations for 2025.” (Chemical Products)

Spotlight Prices

“The Prices Index reading continues to be driven by increases in steel and aluminum prices that impact the entire value chain, as well as tariffs applied to many imported goods. 

A Prices Index above 52.8 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Producer Price Index for Intermediate Materials.

In October, the 14 industries that reported paying increased prices for raw materials, in order, are: Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Nonmetallic Mineral Products; Primary Metals; Miscellaneous Manufacturing; Textile Mills; Fabricated Metal Products; Machinery; Computer & Electronic Products; Wood Products; Transportation Equipment; Furniture & Related Products; Food, Beverage & Tobacco Products; and Chemical Products. The two industries that reported paying decreased prices for raw materials in October are: Petroleum & Coal Products; and Paper Products.

This report again reeks of stagflation.

But that’s OK because Trump says there is no inflation. He blames the Powell Fed for not cutting rates.

Besides, Trump’s new motto is wait till next year.

Trump Adopts Chicago Cubs’ Perpetual Message, “Wait Till Next Year”

In case you missed it, please note Trump Adopts Chicago Cubs’ Perpetual Message, “Wait Till Next Year”

“One Big Beautiful Bill” did not resonate. Trump opts for “Wait Till 2026”.

During a recent event about autism, the president waved off questions from reporters about the economy. “I’d rather not talk about some nonsense on the economy. I will say this: The economy is unbelievable,” Trump said at the time.

Ah yes, the unbelievable economy. ADP is wrong, the BLS is wrong, the polls are wrong, and anyone who disagree is wrong. It’s truly unbelievable.

But “Wait Till 2026” is a fundamental mistake. When 2026 is bad, the message will have to change.

The beauty of a more Cub-esque “Wait Till Next Year” is the slogan never has to change.

Meanwhile, please not the ISM comments on steel and aluminum. “The Prices Index reading continues to be driven by increases in steel and aluminum prices that impact the entire value chain.”

February 11, 2025: Trump’s Steel Tariffs Now Will Work as Good as the First Time

Q: How’s that? A: Very poorly.

March 13, 2025: The Amazing “Success” of Trump’s 2018 Aluminum Tariffs in One Picture

I hope you can take a bit of headline sarcasm because the true story follows.

September 6, 2025: Trump’s Aluminum Tariffs Seriously Backfire Already

Tariffs did not and will not bring production back to the US.

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