Manufacturing Keeps Growing, But Prices Are Surging Again

The latest ISM Manufacturing PMI report shows the sector expanded for a ninth straight month in September, registering 54.5% — just a tenth of a point below August. On the surface, that reads as "steady as it goes." Underneath, the report tells a more complicated story: new orders and employment both accelerated, but input prices jumped sharply, and the commodities list reads like a freight cost forecast in miniature.

54.5% -Manufacturing PMI (9th month of growth)

77.9%- Prices Index (up 6.8 pts)

59.0% -Supplier Deliveries (10th month slower)

41.6% -Customers' Inventories (still "too low")

Growth Is Real, But It's Losing Some Momentum

New orders expanded for a ninth consecutive month, climbing to 55.3% and actually accelerating from August. Production stayed in growth territory too, though it cooled slightly to 56.7%. Employment picked up for a third straight month, landing at 52.7%. Five of the six largest manufacturing industries — computer and electronic products, food and beverage, transportation equipment, machinery, and chemicals — expanded in September.

That said, the tone of the commentary included in the report was notably more cautious than the numbers alone suggest: 60% of respondent comments were negative in September, and pricing volatility, tariffs, and lengthening lead times were the most frequently cited concerns.

Prices Are the Headline Shippers Should Pay Attention To

The Prices Index jumped 6.8 percentage points to 77.9% — a level the report notes hasn't been seen since the onset of the Iran war earlier this year. Nearly 59% of respondents reported paying higher prices in September, up from 46% in August. Steel, aluminum, tariff-affected imports, and petroleum-based products were all called out as drivers.

Freight and fuel both appear directly on this month's list of commodities up in price, alongside diesel fuel, steel, aluminum, and a wide range of electronic components — several of which have now been rising for multiple consecutive months.

Supplier deliveries also slowed for a tenth straight month, which is typical when demand firms up, but it compounds the pricing pressure: slower deliveries plus rising input costs is a combination that tends to show up in landed costs well before it shows up in finished goods pricing.

The Inventory Picture Points to More Freight Volume Ahead

The Customers' Inventories Index remains in "too low" territory at 41.6%, continuing a trend that's now stretched on for 24 months. That matters because a "too low" reading is typically viewed as a positive signal for future production — customers generally need to restock before demand softens, not after. Combined with a Backlog of Orders Index that jumped 4.6 points to 56.4%, there's a reasonable case that current production levels will need to keep up, or accelerate, in the months ahead.

For shippers, a restocking cycle layered on top of already-slower supplier deliveries and rising input costs is exactly the kind of environment where freight demand and pricing pressure tend to move together.

What This Means for GAIN Clients

• Rising input costs will eventually show up in freight negotiations. When steel, aluminum, and fuel are all climbing together, carriers and vendors alike have more grounds to push for rate increases at the next renewal. Getting ahead of a rate review now is cheaper than reacting to one later.

• Low customer inventories suggest freight volumes have room to grow, not shrink. If restocking accelerates as the "too low" signal suggests it should, shippers without flexible capacity plans may find themselves competing for capacity at exactly the wrong moment.

• Tariff exposure is still a live issue, not a settled one. Tariffs were cited in over a third of negative comments this month, with multiple respondents specifically flagging new or shifting Canada-related tariffs disrupting established supply chains. Shippers sourcing internationally should treat this as an ongoing variable, not a one-time adjustment already absorbed.

None of this points to a manufacturing slowdown — nine straight months of growth is nine straight months of growth. But the combination of rising prices, slower deliveries, and understocked customers is a set of conditions that tends to tighten freight markets from the demand side, even while capacity-side pressures (like the driver and capacity shifts we've covered recently) are already squeezing it from the supply side.