Factory output hits a five-year high in October ISM report, with freight demand in the balance

Factory activity in the United States picked up again in October, and that matters to anyone hauling raw materials, parts or finished goods. The Institute for Supply Management said on Nov. 2 that its manufacturing PMI rose to 55.5 from 54.5 in September, according to TD Economics and the ABA Banking Journal. It is the tenth straight month of expansion.

What the report showed

TD Economics, in its Nov. 2 write-up of the ISM data, said production rose 2.3 points to 59.0, the highest reading since November 2021. New orders edged up 0.2 points to 55.5, and customers' inventories stayed low at 41.6, which usually means buyers will need to restock.

Manufacturers' own inventories rose 2.8 points to 51.4 and returned to expansion, TD Economics reported. Imports rose 1.9 points to 52.9, and new export orders gained 0.3 points to 51.2. The ABA Banking Journal reported that 12 manufacturing industries grew in October and three contracted.

Not everything is smooth. TD Economics said supplier deliveries were at 59.1, which points to longer delivery times, and that the prices-paid index fell 2.7 points to 75.2. That was the largest monthly drop in the series, but input costs are still rising widely.

What it means for carriers

Higher production and rebuilding inventories mean more freight moving from plants to warehouses and customers. Carriers that serve industrial lanes, flatbed, and dedicated manufacturing accounts are the first to feel it. A low reading on customers' inventories also suggests orders could keep coming in the weeks ahead, though ISM's survey measures direction, not tonnage.

Slow supplier deliveries are a reminder that the supply chain is still stretched. When parts arrive late, plants run short and then rush shipments, which tends to show up as short-notice tenders and more spot activity.

What shippers and brokers should watch

Shippers should read the imports gain alongside the production gain: more inbound containers and more outbound truckload demand can land in the same weeks, especially near ports and rail ramps.

The cooler prices reading is welcome for goods inflation, TD Economics said, but it is still elevated, and the firm noted the inflation challenge is not resolved. Brokers should not assume input costs, fuel included, will ease on any particular schedule.

The next ISM manufacturing report, for November, is due Dec. 1. Until then, weekly tender and spot data will show whether the factory rebound is turning into more truckload demand.