US manufacturing activity strengthened in October, beating expectations and extending its expansion streak to 10 consecutive months. Strong domestic demand and increased business investment supported factory production.
However, rising input costs continued to threaten the country’s inflation outlook. The Institute for Supply Management (ISM) reported Monday that its Manufacturing PMI climbed to 55.5. The reading exceeded September’s 54.5 and economists’ forecast of 54.5.
Production Surges as New Orders Strengthen
Factory production recorded significant gains, reaching 59.0, its highest level since late 2021. Additionally, new orders increased slightly to 55.5 from September’s 55.3. Employment also remained in expansion territory at 52.4, while export orders improved.
Besides, strong consumer spending and growing artificial intelligence investment supported manufacturing demand. US domestic demand recorded its strongest growth in more than five years during the third quarter. Consequently, the broader economy expanded at an annualized rate of 3.4%.
Rising Factory Costs Keep Inflation Concerns Alive
However, manufacturers continued facing higher input costs and supplier delays. The supplier deliveries index reached 59.1, indicating slower deliveries. Meanwhile, the prices-paid index eased to 75.2 from September’s 77.9.
Significantly, September inflation reached 3.6% annually, exceeding the Federal Reserve’s 2% target. Hence, policymakers maintained interest rates between 3.75% and 4.00%. Persistent inflation could encourage further tightening, potentially increasing borrowing costs for businesses.
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