September PMI Numbers & Their Impact on the Industrial Economy

The latest PMI numbers from the Institute of Supply Chain Management indicate that U.S. manufacturing activity has expanded for the ninth consecutive month in September. However, supply chain leaders are still facing challenges such as supply chain constraints, rising pricing pressures, increasing transportation costs, and commodity inflation.

The September PMI stood at 54.5, which is a 10 basis point decline from August and 40 basis points below the consensus expectations. This reading is consistent with approximately 2.4% GDP growth and signals a healthy industrial economy moving into the fourth quarter. Among the largest tracked manufacturing industries, five reported new-order growth in September, including computer and electronics, chemical products, transportation equipment, food and beverage, and machinery.

Despite the overall expansion, surveyed supply chain executives expressed concerns about mounting headwinds, including rising diesel costs, tariff-related input inflation, and slower supplier delivery times. The New Orders Index, which is a more significant data point for freight markets, expanded for the ninth consecutive month, rising 1.6% from August to 55.4.

However, the positive demand sentiment declined to a 1.7-to-1 ratio from 2.5-to-1 in July. Supply chain constraints have been signaled for 10 consecutive months through the Supplier Delivery Index. The industrial economy accounts for approximately two-thirds of LTL revenue, and ISM readings tend to anticipate inflections in LTL data by around three months.

LTL rates have increased by nearly 8% year-over-year in September compared to the same period last year, with the monthly cost per hundredweight being around 8% higher than a year ago. These factors suggest positive growth for LTL, with full third-quarter earnings reports expected to be released later in October.