Factories expanding, households retreating: the US confidence split

At a glance: The Institute for Supply Management's (ISM) manufacturing PMI stood at 54.5 in September 2026, the ninth consecutive month above the 50 mark that separates expansion from contraction. The Conference Board's Consumer Confidence Index fell 6.7 points to 81.9, with expectations down for a third month. For businesses setting 2027 budgets, the split points to resilient industrial demand alongside a more cautious consumer.

Two readings of the same economy

The two surveys landed within days of each other and point in different directions.

Indicator, September 2026	Reading	Change
ISM Manufacturing PMI	54.5	Ninth consecutive month above 50
ISM New Orders	55.3	Above 50 every month in 2026
ISM Employment	52.7	Up from 51.2 in August
Conference Board Consumer Confidence Index (1985=100)	81.9	Down 6.7 points from 88.6
Present Situation Index	109.3	Down 7.9 points
Expectations Index	63.6	Down 5.9 points, third straight decline
12-month inflation expectations (average)	6.1%	Up 0.3 points

Sources: ISM Report on Business (headline PMI); PNC Economics analysis of the ISM data (components); The Conference Board.

The factory floor: steady, not spectacular

The ISM's headline figure of 54.5 for September was close to August's level and marked the ninth consecutive month in expansion territory. New orders, at 55.3, have stayed above 50 in every month of 2026, according to PNC Economics' analysis of the ISM data. Employment rose to 52.7 from 51.2, which PNC describes as a bright spot.

Not every component was strong. PNC notes that inventories fell and were the only component in contraction. It reads the overall picture as solid demand alongside elevated input costs, with a risk that demand moderates.

WCRC analysis: a PMI in the mid-50s describes a manufacturing sector that is growing steadily. Rising factory employment is the more notable signal, because hiring is a decision managers take only when they expect orders to last.

The household: sharply more cautious

The Conference Board's September survey tells a different story. "The Consumer Confidence Index deteriorated notably in September, following two prior months of softening," said Dana M. Peterson, Chief Economist at The Conference Board.

Both halves of the index weakened. The Present Situation Index, which reflects how consumers see business and labour conditions today, fell 7.9 points to 109.3. The Expectations Index, covering the outlook for income, business and jobs, dropped 5.9 points to 63.6, its third consecutive monthly decline. "The Present Situation Index fell sharply, while the Expectations Index slipped further into negative territory," Peterson said.

The Conference Board also reports that consumers' appraisals of current business conditions turned negative for the first time since September 2024. The labour market differential, the share saying jobs are "plentiful" minus the share saying jobs are "hard to get", narrowed to 1.7 points. Average 12-month inflation expectations rose to 6.1%.

Peterson pointed to fuel costs as a factor: mentions in consumers' write-in responses "rose to new heights, reflecting September's surge in fuel costs". She added that consumers "still anticipated their household incomes to rise, but less so compared to previous months".

Why the two can diverge

WCRC analysis: there are several plausible reasons the two surveys disagree, and they matter for planning.

• Different customers. Manufacturing demand includes business investment, government spending and exports. A factory supplying data centres or infrastructure can be busy while households cut back.
• Prices hit households first. Higher fuel costs reduce household spending power directly, and show up quickly in sentiment. Manufacturers feel them as input costs, which they may be able to pass on.
• Sentiment leads, or misleads. Consumer confidence can fall well before spending does, and sometimes without spending falling much at all. A third straight drop in expectations is worth watching, but it is not yet a measure of what people are buying.

Planning for 2027

The practical question for leaders is how to build budgets that work whether households recover or retreat further.

WCRC analysis: the split favours business-to-business and industrial exposure over discretionary consumer exposure in the near term. Consumer-facing businesses face two pressures at once: weaker confidence and higher inflation expectations, which can harden resistance to price increases. Industrial businesses face a different risk: if consumer weakness eventually reaches final demand, factory orders would follow.

What it means for leaders

• Segment your 2027 plan by customer type. Treat business, government and household demand as separate lines with separate assumptions, rather than one growth number.
• Prepare for price sensitivity. With average inflation expectations at 6.1%, consumers may push back harder on price rises. Test pricing before committing to them.
• Watch the Expectations Index. Three consecutive declines are a warning. A fourth would strengthen the case for cautious consumer forecasts.
• Build flexible cost bases. Variable labour, shorter supplier contracts and staged capital spending give room to adjust if the split resolves downwards.
• Track factory hiring. If ISM employment keeps rising, it supports the view that industrial demand is durable; a reversal would be an early signal.

Quick answers

Q: What was the ISM manufacturing PMI in September 2026? A: The ISM manufacturing PMI was 54.5 in September 2026, the ninth consecutive month above 50, indicating continued expansion in US manufacturing.

Q: What was US consumer confidence in September 2026? A: The Conference Board's Consumer Confidence Index fell 6.7 points to 81.9 in September 2026, with the Expectations Index down to 63.6, its third consecutive decline.

Q: Why are manufacturing and consumer confidence diverging? A: Factory demand includes business, government and export customers, while households are more directly exposed to higher fuel costs. The Conference Board cited the surge in fuel costs in consumers' responses.