US ISM Manufacturing PMI rises to 55.5, US economy is stronger than expected. The impact of AI demand and reignited inflation on the stock market
Introduction: The recovery of the US manufacturing sector is clear
On November 2, 2026, the Institute for Supply Management (ISM) announced that the October manufacturing PMI was 55.5, exceeding the market expectation of 54.7.
It rose 1.0 points from the previous month’s 54.5, indicating an improvement in manufacturing business sentiment.
An ISM manufacturing PMI above 50 indicates economic expansion, while below 50 indicates economic contraction.
The current level of 55.5 means that the US manufacturing sector has been expanding for 10 consecutive months.
Of particular note is that the production index rose to 59.0, the highest level since November 2021.
On the other hand, the price index remains at a very high level of 75.2.
From these statistics, I believe the following three points are important.
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The recovery of the US manufacturing sector is stronger than expected, and the risk of recession is decreasing.
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While the expansion of demand related to AI, semiconductors, and data centers is supporting the manufacturing sector, there is a large disparity between industries.
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Despite the strong economy, inflationary pressure continues, and expectations for additional interest rate hikes by the Fed may strengthen.
In other words, while this ISM report is good news for the US economy, it is not necessarily entirely positive for the stock market.
I would like to consider the reasons for this in detail.
Analyzing the breakdown of the ISM manufacturing PMI
First, let’s check the main indices for this time.