What's Happening?
The Institute for Supply Management (ISM) has released its December 2025 Supply Chain Planning Forecast, projecting a 3% increase in manufacturing capital expenditures in the United States for 2026, following a 3.5% rise in 2025. The forecast also anticipates a 0.4 percentage point growth in manufacturing employment. This outlook reflects growing confidence among purchasing and supply management executives, with revenues expected to increase in 16 out of 18 manufacturing industries. Despite a contraction in manufacturing for nine consecutive months as of November, executives remain optimistic about a turnaround in the latter half of 2026. The report highlights that manufacturers are operating at 82.4% of normal capacity, an increase from 79.2%
in May 2025, and production capacity is expected to expand by 5.2% in 2026. This growth is supported by additional hiring, investment in plant and equipment, longer operating hours, and the replacement of older machinery with advanced technology.
Why It's Important?
The anticipated growth in capital expenditures and employment in the U.S. manufacturing sector is significant as it suggests a potential rebound in the industry, which has been experiencing a prolonged contraction. The increase in production capacity and investment in new technology could enhance the competitiveness of U.S. manufacturers on a global scale. This growth is likely to have a positive impact on the broader U.S. economy by potentially increasing exports and improving trade balances. Additionally, the expected rise in employment could help alleviate some of the pressures in the labor market, contributing to economic stability. However, the cautious optimism reflected in the ISM report indicates that while growth is expected, there are still economic and cost uncertainties that could affect the sector's performance.
What's Next?
As the manufacturing sector prepares for anticipated growth in 2026, companies are likely to focus on strategic investments in technology and workforce development to enhance productivity and efficiency. The expected increase in export activity in the first half of 2026 could lead to new trade opportunities and partnerships. Manufacturers will also need to manage rising costs, as prices for raw materials and labor are projected to increase. The industry will continue to monitor economic conditions and adjust strategies accordingly to maintain momentum and address any potential challenges that may arise.
