MediumIV Macro Policy & Sovereign Debt1 October 2026, Thursday · 17:00 TRT (UTC+3)
US factory price pressure returns to levels seen when the Iran war began
The ISM manufacturing PMI slipped 0.1 points from August to 54.5 in September but stayed in expansion territory. The raw materials prices index, however, jumped 6.8 points to 77.9, returning to where it stood when the Iran war began.
The Institute for Supply Management (ISM) published its September manufacturing report at 17:00 TRT on 1 October. The purchasing managers' index (PMI), where any reading above 50 signals expansion, came in at 54.5, against 54.6 in August. A preview by Continuum Economics on 23 September had expected a rise to 55.5. New orders climbed from 53.7 to 55.3, backlogs rose 4.6 points to 56.4 and employment gained 1.5 points to 52.7. The production index, by contrast, fell from 58.3 to 56.7.
Prices were the starkest part of the report. The prices index rose from 71.1 to 77.9, a level the ISM said matched the start of the Iran war. Of the negative comments from respondents, 46% cited price volatility, 34% tariffs and 30% the Iran war. According to Mortgage News Daily, yields initially rose because orders, backlogs and prices all beat expectations. That move was reversed within about 20 minutes.
Talay assessment
Bottom line
US manufacturing kept expanding in September without losing pace. But the 6.8-point jump in the prices index shows the energy shock feeding back into producer costs. Stronger orders indicate that demand has not weakened. Taken together, this keeps the debate over a Fed rate rise alive.
Likely effects
- US inflationNegative1–6 months
A prices index of 77.9 shows input costs rising as fast as they did at the start of the Iran war; that pressure could reach producer prices in the coming months.
- Fed expectationsUncertainWeeks
Firmer orders and prices could again support rate-rise expectations that the August PCE data had softened.
- TürkiyeNegative1–6 months
If persistent US price pressure keeps dollar yields high for longer, borrowing costs for emerging economies, Türkiye included, will stay elevated.
Possibilities, ranked
- 1Cost pressure persists55%
The prices index stays above August's 71.1, and producer prices accelerate in October and November.
Watch: The October ISM prices index due on 3 November and September PPI
- 2Easing alongside energy30%
If oil prices retreat, the prices index returns to around August's 71.1.
Watch: A marked decline in Brent futures through October
- 3Demand breaks15%
High yields weigh on orders, and the PMI starts sliding towards the 50 threshold.
Watch: The October ISM new orders index falling below 53.7
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Market reaction
Indicators affected
- ISM manufacturing PMI (September)▼ 54.5
- ISM prices index▼ 77.9 (+6.8)
- New orders index▲ 55.3 (+1.6)
- Order backlogs▲ 56.4 (+4.6)