ISM's Prices Index Jumped 6.8 Points to 77.9% in September. One Day Earlier, BEA Said Core PCE Inflation Was Running at 3.0%.

by Alina Castellanos · October 2, 2026

Economics Correspondent, US Market Current

The Institute for Supply Management's Prices Index climbed 6.8 percentage points to 77.9% in September, the largest move of any index in the report's summary table and the 24th consecutive month of rising raw-material costs, according to the September Manufacturing PMI report ISM released Thursday, Oct. 1. The headline Manufacturing PMI itself barely moved, registering 54.5% against 54.6% in August, a ninth straight month of expansion.

The price reading stands out because it undoes most of the summer's easing. ISM's release describes the September figure as "close to its level (78.3 percent in March) at the beginning of the Iran war," and the report's chair, Susan Spence, attributed it to the same three forces the survey has cited for months: "(1) increases in steel and aluminum prices that impact the entire value chain, (2) tariffs applied to many imported goods and (3) increases in petroleum-based products as a result of the Middle East conflict." The share of respondents reporting higher prices rose to 58.6% from 46.2% in August, a 12.4-point jump, per the release.

Every one of the six largest manufacturing industries reported paying more in September, ISM said, listing Petroleum & Coal Products, Machinery, Food, Beverage & Tobacco Products, Computer & Electronic Products, Chemical Products and Transportation Equipment in that order. Sixteen of 18 industries reported higher raw-material prices. The commodities table at the back of the report lists two dozen items up in price, led in longevity by aluminum at 34 consecutive months, copper at 15 and steel at 11. Under "Commodities Down in Price," the report prints a single word: "None."

The activity side of the survey was steadier than the price side. The New Orders Index rose 1.6 points to 55.3%, its ninth month in expansion, and the Backlog of Orders Index jumped 4.6 points to 56.4%. The Employment Index rose 1.5 points to 52.7%, which ISM notes is above the 50.3% threshold that "over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment." The Production Index fell 1.6 points to 56.7% but remained in expansion for an 11th month, and the Inventories Index slipped 2 points to 48.6%, back into contraction after readings above 50% in June, July and August.

ISM's own gloss on the month was that activity held up while mood deteriorated. "Of the five subindexes that make up the PMI, only New Orders and Employment grew faster than the previous month," Spence said in the release. "In September, 40 percent of the comments were positive and 60 percent negative, with a 1-to-1.6 ratio of positive to negative sentiment. Among negative comments, pricing volatility was mentioned in 46 percent, tariffs 34 percent, the Iran war 30 percent and increasing lead times 21 percent; most comments mentioned multiple factors."

The respondent quotes in the report are, in several cases, about Canada. A Transportation Equipment panelist wrote: "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." An Electrical Equipment respondent said "New tariffs against Canada have drastically increased costs for capital expenses as well as assemblies." A Machinery respondent reported that orders in "the semiconductor, electronics and government sectors" had "doubled yet again" along with delivery times, while "Canada tariffs have impacted cross-border costs and left our supply chain team scrambling."

There is a data-center thread running through the comments as well. One Machinery panelist wrote that "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." A Computer & Electronic Products respondent cited "local pushback on data centers in the U.S. and continuing material/component shortages." The short-supply list includes DRAM, memory (nine consecutive months), electronic components (19 months) and electrical components (15 months).

ISM's translation of the headline reading into output is the same 2.4% figure it attached to August's 54.6% reading: "The past relationship between the Manufacturing PMI and the overall economy indicates that September reading (54.5 percent) corresponds to a 2.4-percent increase in real gross domestic product (GDP) on an annualized basis," Spence said. The report also notes that only 2% of manufacturing GDP contracted in September, versus 22% in August, and that 12 of 18 industries reported growth, with Printing & Related Support Activities and Textile Mills the two in contraction.

The ISM report landed a day after the Bureau of Economic Analysis published its August Personal Income and Outlays release on Wednesday, Sept. 30. That release put the PCE price index up 0.3% on the month and 3.4% from a year earlier, with the index excluding food and energy up 0.2% for the month and 3.0% over the year, according to BEA. The July readings in the same table were 0.1% for both the headline and core monthly changes.

Spending accelerated sharply in August on BEA's figures. Current-dollar personal consumption expenditures rose $190.8 billion, or 0.9%, after a 0.1% gain in July, with goods spending up $114.1 billion and services up $76.7 billion. Real PCE rose $92.8 billion, or 0.6%, versus 0.1% in July. Personal income rose $66.6 billion, or 0.2%, and disposable personal income rose $68.6 billion, or 0.3%, which BEA said "primarily reflected increases in compensation and government social benefits," the latter led by Medicare and social security benefits, per the technical notes. Real disposable income was flat on the month, at 0.0%, and the personal saving rate was 4.1%, with personal saving at $990.2 billion.

The September 30 release is not a routine monthly update. BEA stated that "Today's release presents monthly results from the annual update of the National Economic Accounts. The revisions for estimates of personal income and outlays begin with January 2021." The technical notes add that compensation figures for January through March 2026 now incorporate first-quarter data from the BLS Quarterly Census of Employment and Wages, and that April-through-July wages and salaries reflect revised Current Employment Statistics data. Month-to-month comparisons with the previously published July figures should be read with that in mind; the 3.3% year-over-year core PCE rate BEA reported for July in its Aug. 26 release (BEA 26-39) has itself been through the annual revision.

Taken together, the two releases describe an economy in which goods demand and factory order books strengthened into the end of the third quarter while the price signals the Federal Reserve watches most closely stayed well above its 2% objective. ISM's price gauge is a diffusion index, not an inflation rate, and the release itself cautions that a reading above 52.8% "over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Producer Price Index for Intermediate Materials" rather than with any consumer measure. But the direction of travel in September, after the FOMC raised the funds rate target to 3.75%-4.00% on Sept. 16, is the opposite of what a tightening committee would want to see.

What comes next is a dense two weeks. ISM's Services PMI for September is the next survey release, the September CPI from BLS follows, and BEA's September Personal Income and Outlays report is scheduled for Oct. 29 at 8:30 a.m. EDT, one day after the FOMC's Oct. 27-28 meeting concludes. What the ISM report does not say is how much of the September price jump reflects the new Canadian tariff schedule versus the Middle East energy premium; the release attributes the move to both without apportioning it, and the respondent comments, which mention "multiple factors," do not settle the question either.