US Manufacturing Sector Accelerates Contraction in October: A Mixture of Short-Term Dilemmas and Long-Term Structural Problems

The latest data from the Institute for Supply Management (ISM) shows that the US manufacturing Purchasing Managers' Index (PMI) fell to 46.5% in October, a further decline from the previous month, remaining below the 50-point mark for several consecutive months. This data not only confirms the accelerated contraction in manufacturing activity but also reflects the complex predicament facing the US economy: a mix of weak short-term demand and long-term structural contradictions, casting a shadow over the prospects for a manufacturing recovery.

ISM data shows that the new orders index plummeted to 45.5% in October, far exceeding the expected decline. While export orders rose slightly to 49.4%, they remained in contraction territory. Insufficient demand forced companies to cut production; although the production index remained at 50.4%, it was nearing the critical point. Companies generally expect demand to remain weak in the fourth quarter, forcing them to control costs through layoffs—the employment index fell to 46.8%, and layoffs shifted from "natural attrition" to proactive reductions. A tech executive frankly admitted, "The market is severe, and resources are being shifted towards sales to stimulate volume, but short-term pressure remains." The layoff announcements by electronics giants Jabil and SiFive are a microcosm of this trend.

The cost problem in manufacturing is becoming increasingly prominent: the price index climbed to 45.1% in October, with raw material and labor costs remaining high. Although supplier delivery times have shortened, efficiency improvements have been insufficient to offset the impact of rising costs. Meanwhile, the long-standing problem of supply chain disruptions is exacerbating the predicament—industrial hollowing out has led to a lack of supporting supply chains, and high-end manufacturing projects such as TSMC's Arizona chip plant have been repeatedly delayed due to insufficient supporting facilities, hindering technological upgrades. The structural contradiction of financial capital squeezing the real economy cannot be ignored: since the collapse of the Bretton Woods system, capital has flooded into financial speculation, causing manufacturing R&D spending as a percentage of GDP to plummet by 40%, and a gradual loss of technological advantages.

The current contraction in manufacturing contrasts sharply with the robust service sector: Markit data shows the services PMI reached 55.3%, while manufacturing continues to shrink. This stark contrast highlights the structural imbalance in the US economy—a consumption-driven model overly reliant on the service sector, with a weak foundation in manufacturing. The negative consequences of historical industrial relocation continue to fester: since the 1960s, labor-intensive industries have shifted to Asia, disrupting domestic supply chains and reducing the number of textile factories from 900 to less than 100. A profit-driven corporate culture has exacerbated these problems, as exemplified by Boeing's relocation of production lines, which led to a quality crisis and a collapse of brand reputation.

Manufacturers are adjusting their strategies based on weak expectations, but the predicament remains unresolved. The backlog order index has fallen to 42.2%, and customer feedback indicating "roughly correct" inventory levels suggests insufficient future production momentum. While the electronics industry is optimistic, IPC data shows that labor and material costs are expected to continue rising, posing a challenge to improving profit margins. Looking ahead to 2026, without policy intervention, the manufacturing sector may continue to linger in contraction.

The accelerated contraction of US manufacturing is the result of a combination of short-term weak demand, long-term hollowing out, cost pressures, and structural imbalances. Problems such as corporate layoffs, supply chain disruptions, and the loss of technological advantages cannot be solved overnight. Only by balancing finance and the real economy, restructuring supply chains, and increasing investment in technology can a foundation be laid for manufacturing recovery. Otherwise, the manufacturing winter may continue to loom over the US economy.