US September ISM manufacturing 54.5 vs 55.0 expected

• Prior reading was 54.6
• New orders 55.3 vs 53.7 prior
• Employment 52.7 vs 51.2 prior
• Prices paid 77.9 vs 72.3 expected
• Prior prices paid 71.1

The prices paid number is grabbing the market's reaction in the immediate aftermath of the report as it soared. US 30-year yields are at the highs of the day, up 5.2 bps to 5.69%, the high of the day. That dynamic is also weighing on equity markets.

For background, the ISM manufacturing PMI is the oldest survey of its kind and still the first major piece of US data each month. It's released at 10 am ET on the first business day of the month by the Institute for Supply Management, a trade group for purchasing professionals that was known as the National Association of Purchasing Management until 2001. The survey has been compiled in its current form since 1948, giving it one of the longest track records of any economic indicator.

The methodology is simple. ISM asks purchasing and supply executives at hundreds of manufacturing firms whether activity is better, worse or the same as the prior month across a series of categories. Those answers are turned into diffusion indexes, where 50 is the dividing line. Above 50 means more respondents reported improvement than deterioration; below 50 means the opposite. The figures are seasonally adjusted.

The headline PMI is an equal-weighted composite of five sub-indexes: new orders, production, employment, supplier deliveries and inventories. Supplier deliveries is inverted in spirit, as slower deliveries push the index higher, reflecting the idea that stretched supply chains usually signal strong demand. That quirk has occasionally flattered the headline, most notably during the pandemic.

ISM also publishes indexes that don't feed into the headline, including prices paid, backlog of orders, new export orders, imports and customers' inventories. Prices paid is closely watched as an early read on goods inflation and is often the most market-moving component after the headline.

Alongside the numbers, ISM publishes anonymous comments from respondents grouped by industry, which offer a qualitative snapshot of conditions in sectors such as chemicals, transportation equipment and machinery.

ISM notes that a PMI reading in the low 40s or higher is generally consistent with expansion in the broader economy, a reminder that manufacturing is a small slice of US output. A competing survey from S&P Global is released earlier in the day and often diverges.