U.S. Manufacturing PMI Rises... Price Pressures Persist

【Financial News, New York—Correspondent Lee Byung-cheol】 U.S. manufacturing is expanding faster than expected, buoyed by resilient consumer spending and investment in artificial intelligence (AI). However, inflationary pressures are proving difficult to ease, as companies continue to face high costs for raw materials and intermediate goods.
On the 2nd (local time), the Institute for Supply Management (ISM) said the manufacturing purchasing managers’ index (PMI) rose 1.0 point to 55.5 in October from 54.5 the previous month. That was above the market forecast of 54.5. The manufacturing PMI has remained above 50—the threshold separating expansion from contraction—throughout this year. Manufacturing accounts for about 9.4% of the U.S. economy.
Resilient consumer spending and companies’ AI investments are driving the manufacturing expansion. According to the advance estimate of third-quarter gross domestic product (GDP) released by the U.S. Department of Commerce last week, the U.S. economy grew at an annualized rate of 3.4%. That was well above the 2.2% growth rate in the second quarter. Domestic demand, in particular, grew at its fastest pace in more than five years. Although the war waged by the United States and Israel against Iran is driving up energy prices, consumer spending and business investment are supporting economic growth.
Detailed indicators also confirmed the manufacturing sector’s expansion. The new orders index rose to 55.5 in October from 55.3 in September, and exports also increased. Manufacturers’ inventories grew as well. The previously released GDP report also showed that business inventories rebounded in the third quarter after declining for five consecutive quarters.
The concern is that strong demand is adding to inflationary pressures. Suppliers are unable to keep up with rising orders, and delivery delays continue. The ISM Supplier Deliveries Index rose to 59.1 in October from 59.0 in September. A reading above 50 means suppliers are taking longer to make deliveries.
Price pressures on factory floors also remain high as companies face difficulties securing the raw materials and intermediate goods needed for production.
The prices paid index fell to 75.2 in October from 77.9 in September. It was also below the market forecast of 77.5. However, the fact that the index remains above 75 is seen as indicating substantial upward pressure on manufacturers’ input costs. This means that while price increases have eased from the previous month, inflationary pressures themselves have not been resolved.
With the U.S. economy continuing to grow more strongly than expected, led by consumer spending and AI investment, and cost pressures in manufacturing persisting, the Fed’s future monetary policy is expected to focus more on price stability than on growth. 


[email protected] Correspondent Lee Byung-cheol Reporter