The US manufacturing sector grew for a ninth straight month in September but at a slower pace, according to S&P Global data.
The Manufacturing Purchasing Managers Index (PMI) came in at 52.0, down from 53.0 in August but still above the 50-point threshold that separates growth from contraction.
The slowdown was driven largely by weaker gains in new orders.
Although demand continued to rise, it did so at a rate below the survey’s long-run average.
Exports were particularly soft, declining for a third consecutive month as tariffs weighed heavily on sales to Canada and Mexico.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said the buildup of unsold goods was a key signal of cooling demand.
“Despite a slowing in demand growth, many factories produced more goods, using up raw materials that had been stockpiled ahead of tariff implementation. This poses a downside risk to future production in the absence of a pickup in demand, though also hints at some alleviation of price pressures: there is already evidence of companies offering excess stock to customers at reduced rates,” he said.
Output growth adds to finished goods inventories
Overall production continued to expand, though the pace was weaker than in August.
Output growth was strong enough to allow manufacturers to add to finished goods inventories for a second month in a row.
The build-up, however, reflected slower demand growth and risked creating pressure on future sales.
Backlogs of work declined at the fastest rate in five months, in part due to firms expanding labor capacity.
Employment rose solidly as manufacturers filled vacancies and positioned themselves for future growth.
Increase in tariff-related vendor delays seen
Tariffs continued to add to cost pressures in September.
While input cost inflation eased compared with August, it remained historically elevated.
Vendors were reported to have raised charges, with some companies increasing purchases to safeguard against further supply chain disruption.
At the same time, difficulties in importing goods and stock shortages lengthened vendor delivery times.
Williamson warned that tariff-related delays could curb production and drive up prices if they persist.
“A growing uncertainty, however, relates to supply chains, with September seeing an increase in tariff-related vendor delays, which threaten to curb production and push up prices if these difficulties persist or intensify,” he said.
Manufacturers’ own selling prices rose at a slower pace, reflecting competitive pressures and softer demand.
Output price inflation eased to its lowest level since January, even though it remained high by historical standards.
Business outlook holds steady despite challenges
Despite the softer PMI reading, optimism improved slightly compared with August.
Many firms anticipated stronger sales over the next 12 months, with some suggesting tariffs could help domestic-focused industries gain market share.
However, ongoing uncertainty around trade policy and the broader federal government outlook weighed on sentiment.
Analysts noted that while factories are still expanding, the combination of weaker demand, tariff pressures and inventory build-up presents risks for production in the months ahead.
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