By Vicki Needham - 11/01/11 02:34 PM EDT
Prices paid dropped to 41 percent from 56 percent, the first drop since May 2009.
The manufacturing gauge had registered above 60 through April as the sector led the economic recovery.
Since then, the sector has slowed along with the nation's economic growth, hitting its lowest point in two years at 50.6 percent in August as economists have expressed concern in recent months that another recession is possible.
Most of those worries were quelled last week when the Commerce Department showed that the economy grew 2.5 percent in the third quarter, an improvement over an anemic 1.3 percent from the second quarter.
Consumers have picked up their spending — 70 percent of economic activity and a key component to the recovery — in what is a positive signal heading into the holiday season.
Meanwhile, ISM's employment index dipped slightly to 53.5 percent from 53.8 percent.
Persistently high unemployment is plaguing the economic recovery. Employers added only 103,000 jobs in September and the jobless rate remained entrenched at 9.1 percent.
The government releases its October report on Friday. Similar numbers are expected.