U.S. manufacturing activity dipped slightly in September but remained close to its strongest level in four years. The Manufacturing PMI registered 54.5, down just 0.1 point from 54.6 in August and only two points below July’s four-year high.
Why it matters: Anything above 50 signals expansion, and manufacturing remains comfortably above that threshold. The broader U.S. economy also expanded for the 23rd consecutive month.
Under the hood: New orders strengthened, rising 1.6 points to 55.3 and expanding for the ninth consecutive month. Employment improved as well, jumping 1.5 points to 52.7—just 0.1 point below July’s four-year high.
- In other words, factories are still seeing new business come through the door and they’re adding workers to keep up with it.
The bad news: Inflation pressures surged. The Prices Index jumped 6.8 points to 77.9, its highest level in four months. That signals manufacturers are facing substantially higher prices for the materials and inputs needed to produce goods.
The bottom line: Manufacturing is still rocking and rolling. Activity remains close to four-year highs, new orders are expanding and employment is strengthening. But the sharp increase in prices complicates the picture. Strong growth combined with rising inflation pressures is exactly the combination that could keep the Fed hawkish and put upward pressure on Treasury yields and mortgage rates.