ISM® REPORTS ECONOMIC IMPROVEMENT TO CONTINUE IN 2026

Manufacturing Growth Expected in 2026; Revenue to Increase 4.4%; Capital Expenditures to Increase 3%; Capacity Utilization Currently at 82.4%; Services Growth Projected in 2026; Revenue to Increase 4.6%; Capital Expenditures to Increase 2.5%; Capacity Utilization Currently at 90.2%

TEMPE, Ariz., Dec. 16, 2025 /PRNewswire/ -- Economic improvement in the United States will continue in 2026, say the nation's purchasing and supply management executives in the December 2025 ISM Supply Chain Planning Forecast, formerly known as the Semiannual Economic Forecast. Revenues are expected to increase in 16 of 18 manufacturing industries and 16 of 18 services-sector industries. Capital expenditures are expected to increase by 3 percent in the manufacturing sector (after a 3.5-percent increase in 2025) and increase by 2.5 percent in the services sector (after a 3.9-percent increase in 2025). In 2026, employment is expected to grow by 0.4 percentage point in manufacturing and 2.5 percent in services. After projected growth in manufacturing and services in the first half (H1) of the year, growth in the second half (H2) is projected to accelerate in manufacturing and slightly decrease momentum in the services sector.

These projections are part of the forecast issued by Institute for Supply Management^®'s (ISM^®) Business Survey panelists. The forecast was released today by Susan Spence, MBA, Chair of the ISM Manufacturing Business Survey Committee, and by Steve Miller, CPSM, CSCP, Chair of the ISM Services Business Survey Committee.

Manufacturing Summary
Expectations for 2026 are positive, as 56 percent of survey respondents expect revenues to be greater in 2026 than in 2025. The panel of purchasing and supply executives expects a 4.4-percent net increase in overall revenues for 2026, compared to a 2.5 percentage point increase reported for 2025. Sixteen of the 18 manufacturing industries expect revenue improvement in 2026, listed in order of largest to smallest projected increase: Food, Beverage & Tobacco Products; Fabricated Metal Products; Miscellaneous Manufacturing; Computer & Electronic Products; Chemical Products; Petroleum & Coal Products; Nonmetallic Mineral Products; Transportation Equipment; Primary Metals; Machinery; Paper Products; Furniture & Related Products; Wood Products; Textile Mills; Plastics & Rubber Products; and Electrical Equipment, Appliances & Components.

"Manufacturing's purchasing and supply executives expect to see overall growth in 2026. They are optimistic about overall business prospects for the first half of 2026 and more excited about faster growth in the second half. According to the ISM^® PMI^® Reports, manufacturing was in contraction for the ninth month in a row in November. Respondents continue to expect raw materials pricing pressure in 2026 and see first-half 2025 profit margins improving over the second half of 2025. Manufacturers also predict growth in exports while imports stay the same in 2026," says Spence.

In the manufacturing sector, respondents report the companies operating at 82.4 percent of normal capacity, up 3.2 percentage from the 79.2 percent reported in May 2025. Purchasing and supply executives predict that capital expenditures will increase year over year by 3 percent in 2026, compared to a 3.5-percent increase reported for 2025. Manufacturers expect employment in the sector to grow by 0.4 percentage point in 2026 relative to December 2025 levels, while labor and benefit costs are expected to increase an average of 2.5 percent. Respondents also expect the U.S. dollar to strengthen against two of the currencies of seven major trading partners in 2026.

The Business Survey Panel predicts that prices paid for raw materials will increase 5.4 percent during the first five months of the year, with an overall increase of 4.4 percent for 2026. This compares favorably to a reported 5.4-percent increase in raw materials prices in 2025.

Services Summary
Fifty-four percent of services supply management executives expect their 2026 revenues to be higher than in 2025. They expect a 4.6-percent net increase in overall revenues for 2026, compared to a 4.2-percent increase reported for 2025. The 16 industries expecting revenue increases in 2026 — listed in order of largest to smallest projected increase — are: Real Estate, Rental & Leasing; Information; Professional, Scientific & Technical Services; Wholesale Trade; Health Care & Social Assistance; Accommodation & Food Services; Other Services; Finance & Insurance; Arts, Entertainment & Recreation; Retail Trade; Public Administration; Transportation & Warehousing; Utilities; Mining; Construction; and Educational Services.

"Services supply executives report operating at 90.2 percent of normal capacity, more than the 86.5 percent reported in May 2025. They are optimistic about the first half of 2026 and expect growth to slightly decline in the second half, with a projected increase in capital investment. They forecast that their capacity to produce products and provide services will rise by 2.1 percent during 2026, and capital expenditures will increase by 2.5 percent. Services Business Survey Panel members also predict their overall employment will increase by 2.5 percent during 2026," says Miller.

Respondents expect the prices they pay for materials and services to increase by 4.2 percent during 2026. They also forecast that their overall labor and benefit costs will increase 3.2 percent. Profit margins decreased slightly in the second and third quarters of 2025, but respondents expect growth between now and May 2026.

OPERATING RATE

Manufacturing
Manufacturing purchasing and supply executives report their companies are currently operating at 82.4 percent of normal capacity. This is an increase of 3.2 percentage points when compared to May 2025 (79.2 percent) and an increase when compared to December 2024 (82.3 percent). The following seven industries — listed in order — are operating at or above the average rate of 82.4 percent: Petroleum & Coal Products; Food, Beverage & Tobacco Products; Wood Products; Paper Products; Printing & Related Support Activities; Computer & Electronic Products; and Transportation Equipment.

Services
Services supply executives report their organizations are currently operating at 90.2 percent of normal capacity. This is an increase to the 86.5 percent reported in May 2025, and also above what was reported in December 2024 (87.4 percent). The eight industries operating at or above the average capacity level of 90.2 percent — listed in order — are: Educational Services; Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Finance & Insurance; Agriculture, Forestry, Fishing & Hunting; Other Services; Utilities; and Health Care & Social Assistance.

PRODUCTION CAPACITY

Manufacturing
Production capacity in manufacturing increased 2.8 percent in 2025, as 33 percent of purchasing and supply executives reported an average capacity increase of 12.7 percent, 15 percent reported an average decrease of 8.8 percent, and 52 percent reported no change. This compares to a May 2025 predicted increase in production capacity of 1.8 percent for 2025. Expectations for 2026 are for an increase of 5.2 percent. The 14 industries that expect an increase in production capacity in 2026 — listed in order — are: Wood Products; Primary Metals; Miscellaneous Manufacturing; Fabricated Metal Products; Plastics & Rubber Products; Chemical Products; Machinery; Transportation Equipment; Food, Beverage & Tobacco Products; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Furniture & Related Products; Paper Products; and Petroleum & Coal Products.

The principal means of achieving increases in production capacity in 2025 were (in order of importance):

1)     Additional personnel (permanent, temporary or contract)
2)     Additional plant and/or equipment
3)     More hours worked with existing personnel
4)     Replaced equipment with technically advanced equipment

Services
The capacity to produce products or provide services in the services sector increased 3 percent during 2025. This is greater than what was predicted in May 2025 (-1.1 percent), and 0.7 percentage point lower than the 2.8 percent predicted for the year in December 2024. For 2026, 21 percent of services supply managers expect increases averaging 11.1 percent, and 5 percent of respondents expect decreases averaging 4.9 percent. Seventy-three percent expect no change in capacity. The 12 industries expecting increases in capacity in 2026 — listed in order — are: Professional, Scientific & Technical Services; Information; Construction; Wholesale Trade; Utilities; Health Care & Social Assistance; Management of Companies & Support Services; Transportation & Warehousing; Accommodation & Food Services; Finance & Insurance; Retail Trade; and Educational Services.

The principal means of achieving increases in production or provision capacity in 2025 were (in order of importance):

1)     More hours worked with existing personnel
2)     Additional personnel (permanent, temporary or contract)
3)     Additional plant and/or equipment
4)     More shifts worked with existing personnel

CAPITAL EXPENDITURES — 2025 vs. 2024

Manufacturing
Purchasing and supply executives report 2025 capital expenditures increased 3.5 percent on average when compared to 2024 levels. Expenditures for 2025 beat survey respondents' previous expectations, as they predicted an decrease of 1.3 percentage points for the year in May 2025. The 31 percent of purchasers who reported increased capital expenditures in 2025 indicated an average increase of 31.2 percent, while the 25 percent who said their capital spending was reduced reported an average decrease of 25.4 percent. Forty-four percent of respondents said their spend levels were unchanged in 2025. The 13 industries showing increases in capital expenditures for 2025 — listed in order of percentage increase — are: Nonmetallic Mineral Products; Apparel, Leather & Allied Products; Paper Products; Electrical Equipment, Appliances & Components; Primary Metals; Food, Beverage & Tobacco Products; Wood Products; Computer & Electronic Products; Plastics & Rubber Products; Miscellaneous Manufacturing; Chemical Products; Petroleum & Coal Products; and Furniture & Related Products.

Services
Services supply management executives report their level of capital expenditures in 2025 increased 3.9 percent year over year. This is higher than the 2.8 percent increase reported for 2024 and higher than the 3.3-percent decrease predicted by respondents in May 2025. Thirty-seven percent report increases averaging 15.4 percent, while 10 percent report decreases averaging 17.2 percent. Fifty-three percent indicate they spent the same on capital expenditures in 2025 as in 2024. The 14 industries experiencing increases in capital expenditures in 2025 — listed in order of percentage increase — are: Educational Services; Health Care & Social Assistance; Public Administration; Utilities; Wholesale Trade; Information; Retail Trade; Transportation & Warehousing; Arts, Entertainment & Recreation; Mining; Real Estate, Rental & Leasing; Accommodation & Food Services; Construction; and Finance & Insurance.

PREDICTED CAPITAL EXPENDITURES — 2026 vs. 2025

Manufacturing
Purchasing and supply executives expect capital expenditures to increase 3 percent in 2026. The 32 percent of respondents predicting increased capital expenditures in 2026 indicate an average increase of 26.1 percent, while the 22 percent who said their capital spending would be reduced predict an average decrease of 23.2 percent. The remaining 46 percent said they expect to spend the same in 2026 as in 2025. The eight industries predicting increases in capital expenditures for 2026 — in the following order — are: Primary Metals; Furniture & Related Products; Petroleum & Coal Products; Apparel, Leather & Allied Products; Chemical Products; Fabricated Metal Products; Transportation Equipment; and Machinery.

Services
Services purchasing and supply executives are expecting an increase of 2.5 percent in capital expenditures in 2026, lower than the 3.9 percent increase reported for 2025. The 37 percent of respondents expecting to spend more on capital expenditures predict an average increase of 12.7 percent. An additional 12 percent anticipate a decrease averaging 17.2 percent. Fifty-one percent expect to spend the same on capital expenditures in 2026. The 15 industries expecting increases in capital expenditures in 2026 — listed in order of percentage increase — are: Retail Trade; Utilities; Wholesale Trade; Educational Services; Accommodation & Food Services; Other Services; Mining; Health Care & Social Assistance; Arts, Entertainment & Recreation; Information; Management of Companies & Support Services; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Construction; and Finance & Insurance.

PRICES — Changes Between End of 2025 and End of 2024

Manufacturing
After a May 2025 forecast of a 7.5-percent increase in prices paid for raw materials in 2025, survey respondents report price increases averaging 5.4 percent for the year. The 71 percent who say their prices are higher now than at the end of 2024 report an average increase of 8.9 percent, while the 10 percent who report lower prices indicate an average decrease of 9.5 percent. The remaining 19 percent report no change in 2025. The 11 industries experiencing price increases above the average of 5.4 percent in 2025 — listed in order — are: Electrical Equipment, Appliances & Components; Apparel, Leather & Allied Products; Wood Products; Machinery; Textile Mills; Nonmetallic Mineral Products; Computer & Electronic Products; Fabricated Metal Products; Primary Metals; Paper Products; and Miscellaneous Manufacturing.

Services
In 2025, services supply executives report, prices paid increased by 3.6 percent. This is less than the 7.3-percent increase they predicted in May 2025 and less than the 5.3-percent increase for 2025 predicted one year ago. Sixty-one percent of respondents report price increases averaging 6.2 percent. Three percent indicate decreased prices, with an average reduction of 6.1 percent, and 36 percent of respondents did not experience price changes this year. The 10 industries experiencing price increases above the average of 3.6 percent in 2025 — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Utilities; Management of Companies & Support Services; Wholesale Trade; Construction; Health Care & Social Assistance; Professional, Scientific & Technical Services; Information; Retail Trade; and Public Administration.

PRICES – Predicted Changes Between May 2026 and End of 2025

Manufacturing
Sixty-nine percent of purchasing and supply executives expect the prices they pay to increase in the first five months of 2026 by an average of 8.4 percent, while eight percent anticipate decreases averaging 4.4 percentage points. Including the 23 percent who expect no change in prices, respondents expect a net average overall price increase of 5.4 percentage points before the end of May. The seven industries predicting an average increase in prices paid of 5.4 percent or higher in the first five months of 2026 — listed in order — are: Petroleum & Coal Products; Fabricated Metal Products; Computer & Electronic Products; Textile Mills; Electrical Equipment, Appliances & Components; Nonmetallic Mineral Products; and Transportation Equipment.

Services
Services survey respondents predict purchases in the first five months of 2026 will cost an average of 3.8 percent more than at the end of 2025. This is more than the increase reported for calendar year 2025. Sixty-four percent of services respondents predict the prices they pay will increase an average of 6 percent before the end of May, 2 percent of respondents expect price decreases averaging 6.3 percent, and the remaining 34 percent predict no change in prices. The 11 industries predicting average price increases of at least 3.8 percent in the first five months of 2026 — listed in order of percentage increase — are: Agriculture, Forestry, Fishing & Hunting; Health Care & Social Assistance; Transportation & Warehousing; Professional, Scientific & Technical Services; Public Administration; Arts, Entertainment & Recreation; Accommodation & Food Services; Utilities; Management of Companies & Support Services; Wholesale Trade; and Educational Services.

PRICES — Predicted Changes Between End of 2026 and End of 2025

Manufacturing
Respondents predict a net average increase in prices paid of 4.4 percent between December 2025 and December 2026. Sixty-six percent of respondents expect an average price increase of 7.6 percent in 2026, while eight percent expect an average reduction of 8.2 percent. The remaining 26 percent expect no change in their average prices paid for the year. The nine industries expecting price increases above the predicted average of 4.4 percent by the end of 2026 — listed in order — are: Electrical Equipment, Appliances & Components; Wood Products; Machinery; Chemical Products; Fabricated Metal Products; Computer & Electronic Products; Primary Metals; Textile Mills; and Furniture & Related Products.

Services
For all of 2026, services supply management executives expect their prices to increase an average of 4.2 percent. Sixty-Five percent of respondents expect increases averaging 6.7 percent, 1 percent anticipate prices to drop an average of 8 percent, and 34 percent foresee no change in prices next year. The 11 industries expecting greater than the 4.2-percent average price increase by the end of 2026 — listed in order of percentage increase — are: Management of Companies & Support Services; Transportation & Warehousing; Accommodation & Food Services; Other Services; Health Care & Social Assistance; Utilities; Professional, Scientific & Technical Services; Arts, Entertainment & Recreation; Public Administration; Information; and Wholesale Trade.

LABOR AND BENEFIT COSTS — Predicted Rate Change End of 2026 vs. End of 2025

Manufacturing
Purchasing and supply executives expect higher overall labor and benefit costs for 2026. Fifty-nine percent of respondents expect labor and benefit costs to grow by an average of 4.8 percent for all of 2026, while the 4 percent forecasting lower costs project an average decrease of 8.2 percent. Including the 37 percent of respondents who believe costs will remain the same, the overall net rate of increase is expected to be 2.5 percent for the year. The 11 industries expecting to pay an increase of 2.5 percent or greater — listed in order — are: Wood Products; Primary Metals; Furniture & Related Products; Electrical Equipment, Appliances & Components; Petroleum & Coal Products; Fabricated Metal Products; Paper Products; Miscellaneous Manufacturing; Textile Mills; Nonmetallic Mineral Products; and Computer & Electronic Products.

Services
Services purchasing and supply executives expect a 3.2-percent increase in labor and benefit costs in 2026. Sixty-six percent of respondents expect such costs to increase by an average of 5.2 percent. Another 3 percent of respondents expect labor and benefit costs to shrink by an average of 9 percent, and 31 percent believe costs will remain stable during 2026. The five industries expecting to pay an increase of 3.2 percent or higher are: Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Agriculture, Forestry, Fishing & Hunting; Information; and Arts, Entertainment & Recreation.

EMPLOYMENT — Change in Overall Employment

Manufacturing
ISM's Manufacturing panelists report that sector employment decreased 0.4 percentage point in 2025 and forecast that employment will increase by the same 0.4 percentage point, on average, for the full year of 2026. Twenty-seven percent of respondents expect employment to be, on average, 6.7 percent higher in 2026, while 20 percent predict employment to be lower by an average of 6.8 percent. The remaining 53 percent of respondents expect their employment levels to be unchanged in 2026. The eight industries predicting increases in employment in 2026 — listed in order — are: Primary Metals; Paper Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Machinery; Fabricated Metal Products; Transportation Equipment; and Furniture & Related Products.

Services
ISM's Services panelists report that sector employment was up 0.1 percent for all of 2025. They forecast that employment will increase 2.5 percent by the end of 2026. In the coming year, 40 percent of respondents expect higher levels of employment (up 8 percent on average), 13 percent anticipate lower levels (down 4.8 percent on average), and 47 percent expect their employment levels to be unchanged. The 13 industries anticipating increases in employment in 2026 — listed in order — are: Real Estate, Rental & Leasing; Information; Professional, Scientific & Technical Services; Retail Trade; Wholesale Trade; Health Care & Social Assistance; Accommodation & Food Services; Arts, Entertainment & Recreation; Construction; Transportation & Warehousing; Utilities; Mining; and Educational Services.

EXPORT BUSINESS — Predicted Change for Next Half Year (First Half of 2026)

Manufacturing
Survey responses indicate executives expect increases in new export orders for the first half of 2026. Of the 77 percent of respondents who indicated their companies track export activity, 35 percent predict an increase (33 percent moderate and 2 percent substantial) over the next six months. Nineteen percent of respondents predict a decrease (17 percent moderate and 2 percent substantial) in their exports, and 46 percent anticipate no change in exports over the next six months. The eight industries expecting growth in exports during the first half of 2026 — listed in order — are: Printing & Related Support Activities; Primary Metals; Transportation Equipment; Chemical Products; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; and Food, Beverage & Tobacco Products.

Services
For the first half of 2026, respondents whose organizations provide services outside the U.S. are optimistic concerning business. Of the 21 percent of Services respondents who report that their companies measure exports, 23 percent predict an increase (19 percent moderate and 4 percent substantial) over the next six months. Eight percent of respondents expect a decrease in exports (8 percent moderate and 0 percent substantial), and 69 percent anticipate no change in exports over the next six months. Of the industries that track exports, the three that expect growth in the first half of 2026 are: Retail Trade; Management of Companies & Support Services; and Utilities.

IMPORT BUSINESS — Predicted Change for Next Half Year (First Half of 2026)

Manufacturing
Respondents expect no change in imports in the first half of 2026. Of the 88 percent of purchasers who reported that their companies import materials, 28 percent predict an increase over the next six months (27 percent moderate and 1 percent substantial), while 29 percent predict a decrease (26 percent moderate and 3 percent substantial). The remaining 43 percent of survey respondents expect no change in imports in the first half of 2026. The five industries expecting growth in imports are: Plastics & Rubber Products; Chemical Products; Food, Beverage & Tobacco Products; Transportation Equipment; and Fabricated Metal Products.

Services
Services executives' expectations for import activity for the first half of 2026 have decreased compared to their expectations in December 2024 for the first half of 2025. Of the 43 percent of services respondents who report their organizations import materials and services, 18 percent (16 percent moderate and 2 percent substantial) predict an increase during the first half of 2026. Twenty percent of respondents (19 percent moderate and 1 percent substantial) predict a decrease. The remaining 62 percent expect no change in imports over the next six months. The five industries expecting growth in imports — listed in order — are: Retail Trade; Mining; Transportation & Warehousing; Construction; and Management of Companies & Support Services.

INVENTORY-TO-SALES RATIO

Manufacturing
Among manufacturing panelist companies, 16 percent anticipate increasing their purchased inventory-to-sales ratio during 2026. An additional 23 percent expect their ratio to drop, and 61 percent forecast no change. The diffusion index of 46.6 percent suggests the inventory-to-sales ratio will decrease in 2026.

Services
Seven percent of respondents' companies project increasing their purchased inventory-to-sales ratio during 2026. An additional 11 percent expect their ratio to drop, and 82 percent forecast no change. The diffusion index of 47.7 percent suggests the inventory-to-sales ratio will decrease in 2026.

Note: A diffusion index above 50 percent would indicate an increase in the inventory-to-sales ratio; below 50 percent, a decrease in the ratio.

U.S. DOLLAR — Predicted Strength vs. Major Trading Currencies — in 2026 — Manufacturing Only

Manufacturing
Purchasing and supply executives are expecting the U.S. dollar will generally strengthen in 2026 against two of the foreign currencies listed below. The average diffusion index for this forecast is 48.8 percent, a decrease of 14 percentage points compared to the December 2024 forecast average of 62.8 percent for 2025.

Note: A diffusion index above 50 percent would predict a generally stronger U.S. dollar; below 50 percent, a generally weaker U.S. dollar, with the distance from 50 percent indicative of the predicted strength or weakness.

BUSINESS REVENUES

Business Revenues Comparison — 2025 vs. 2024

Manufacturing
Overall, revenues increased for manufacturers. Forty-four percent of respondents say the companies' revenues were better than in 2024, increasing on average 12.1 percent. Twenty-seven percent say revenues decreased in 2025 by an average of 10.2 percent, and the remaining 29 percent indicate no change. Overall, purchasing and supply executives indicate a net increase of 2.5 percentage points in business revenues for 2025 over 2024. This is more than the 0.1-percentage point increase that was forecast in May 2025 for all of 2025 and less than the 4.2-percent increase predicted in December 2024. The eight industries reporting increases in revenues in 2025 — listed in order — are: Transportation Equipment; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Primary Metals; Wood Products; Miscellaneous Manufacturing; Computer & Electronic Products; and Nonmetallic Mineral Products.

Services
Services supply management executives report that business revenues for 2025 increased year over year by 4.2 percent. This is more than the flat (0-percent) predicted for the year in May 2025. The 55 percent of respondents reporting better business revenues in 2025 than in 2024 estimate an average revenue increase of 9.3 percent. This equals the average decrease of 9.3 percent reported by the 9 percent of respondents who report worse business in 2025. The remaining 36 percent have experienced no change in 2025. The 15 industries reporting increases in revenues in 2025 — in the following order — are: Real Estate, Rental & Leasing; Information; Transportation & Warehousing; Professional, Scientific & Technical Services; Health Care & Social Assistance; Construction; Accommodation & Food Services; Finance & Insurance; Arts, Entertainment & Recreation; Utilities; Retail Trade; Other Services; Public Administration; Wholesale Trade; and Mining.

Business Revenues Prediction for 2026

Manufacturing
Manufacturing survey respondents forecast that business revenues for 2026 will be stronger than in 2025. The 56 percent of respondents forecasting better organizational business revenues in 2026 estimate an average increase of 8.9 percent. This contrasts with an average decrease of 8.1 percent forecast by the 8 percent who predict lower business revenues in 2026. Including the 36 percent who see no change in 2026, the forecast for overall net increase in business revenues for 2026 is 4.4 percent. Sixteen of the 18 manufacturing industries expect revenue improvement in 2026, listed in order of largest to smallest projected increase: Food, Beverage & Tobacco Products; Fabricated Metal Products; Miscellaneous Manufacturing; Computer & Electronic Products; Chemical Products; Petroleum & Coal Products; Nonmetallic Mineral Products; Transportation Equipment; Primary Metals; Machinery; Paper Products; Furniture & Related Products; Wood Products; Textile Mills; Plastics & Rubber Products; and Electrical Equipment, Appliances & Components.

Services
Services survey respondents forecast that their companies' business revenues for 2026 will improve by an average of 4.6 percent. This is slightly more than the 4.2-percent increase reported for 2025 and more than the 3.9-percent increase predicted one year ago for 2025 revenues. The 54 percent of respondents forecasting better business in 2026 estimate an average revenue increase of 10.1 percent. The 10 percent who predict worse business in 2026 expect a decrease of 9.9 percent. The remaining 36 percent see no change. The 16 industries expecting revenue increases in 2026 — listed in order of largest to smallest projected increase — are: Real Estate, Rental & Leasing; Information; Professional, Scientific & Technical Services; Wholesale Trade; Health Care & Social Assistance; Accommodation & Food Services; Other Services; Finance & Insurance; Arts, Entertainment & Recreation; Retail Trade; Public Administration; Transportation & Warehousing; Utilities; Mining; Construction; and Educational Services.

PROFIT MARGINS

Manufacturing
Survey respondents report that profit margins decreased on average during the second and third quarters of 2025. Twenty-four percent of respondents' companies experienced an increase, 38 percent had lower margins, and 38 percent reported no change. Expectations are higher between now and May 2026, as 33 percent of respondents forecast better profit margins, 22 percent predict lower profit margins, and 45 percent predict no change. The eight industries expecting an increase in profit margins through May 2026 — listed in order of percentage increase — are: Apparel, Leather & Allied Products; Primary Metals; Petroleum & Coal Products; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Food, Beverage & Tobacco Products; and Machinery.

Services
Among services supply management executives, 19 percent indicated their organizations experienced an increase in profit margins during the second and third quarters of 2025, 21 percent found smaller profit margins, and 60 percent had no change in margins during that timeframe. From now through May 2026, 34 percent of supply managers expect improved profit margins, 21 percent expect lower profit margins, and the remaining 45 percent of respondents anticipate no change. The nine industries expecting an increase in profit margins through May 2026 are, in the following order: Real Estate, Rental & Leasing; Accommodation & Food Services; Other Services; Wholesale Trade; Management of Companies & Support Services; Construction; Information; Health Care & Social Assistance; and Utilities.

BUSINESS COMPARISON

The First Half of 2026 Compared with the Last Half of 2025

Manufacturing
Manufacturing survey respondents are optimistic about the next six months, as reflected in the diffusion index reading of 56.9 percent. Comparing their outlook for the first half of 2026 to the last half of 2025, 35 percent predict it will be better, 21 percent predict it will be worse, and 44 percent expect no change. The 13 industries expecting improvement in the first half of 2026 — listed in order — are: Primary Metals; Fabricated Metal Products; Food, Beverage & Tobacco Products; Wood Products; Paper Products; Furniture & Related Products; Miscellaneous Manufacturing; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Chemical Products; Computer & Electronic Products; Transportation Equipment; and Machinery.

Services
Services purchasing and supply executives feel positive about the first half of 2026. The diffusion index indicating current expectations registered 65.9 percent. Forty-five percent of respondents expect the first half of next year to be better than the last half of 2025. Twelve percent anticipate it will be worse, and 43 percent predict no change. The 13 industries expecting improvement in the first half of 2026 — listed in order — are: Real Estate, Rental & Leasing; Wholesale Trade; Retail Trade; Accommodation & Food Services; Health Care & Social Assistance; Construction; Professional, Scientific & Technical Services; Other Services; Educational Services; Information; Management of Companies & Support Services; Utilities; and Finance & Insurance.

Note: A diffusion index above 50 percent would generally indicate an expectation of the first half of the coming year being better than the second half of the current year.

The Second Half of 2026 Compared with the First Half of 2026

Manufacturing
Purchasing and supply executives in manufacturing are even more optimistic about the second half of 2026 compared to the first half. The share of survey respondents who forecast the second half of 2026 to be better than the first half is 48 percent, while 9 percent expect it to be worse, and 43 percent expect no change. The diffusion index figure for the second half of 2026 is 69.6 percent, compared to 56.9 percent for the first half of 2026. The 13 industries predicting improvement in the second half of 2026 — listed in order — are: Food, Beverage & Tobacco Products; Paper Products; Furniture & Related Products; Transportation Equipment; Machinery; Miscellaneous Manufacturing; Computer & Electronic Products; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Textile Mills; Wood Products; Chemical Products; and Plastics & Rubber Products.

Services
Services purchasing and supply executives feel slightly less optimistic about the second half of 2026 as compared to the first half of the year. (The diffusion index reading for the second half is 65.3 percent; it is 65.9 percent for the first half.) The share of respondents who currently forecast the second half of 2026 to be better than the first half is 37 percent, while 7 percent expect it to be worse. An additional 56 percent of purchasers expect no change. The 12 industries expecting improvement in the second half of 2026 — listed in order — are: Accommodation & Food Services; Construction; Information; Mining; Retail Trade; Real Estate, Rental & Leasing; Health Care & Social Assistance; Wholesale Trade; Finance & Insurance; Management of Companies & Support Services; Professional, Scientific & Technical Services; and Utilities.

Note: A diffusion index above 50 percent would generally indicate an expectation of the second half of the coming year being better than the first half.

OUTLOOK FOR THE NEXT 12 MONTHS

Manufacturing
Compared to the outlook for 2025 reported in December 2024, survey respondents this year are less optimistic about the outlook for 2026. Forty-four percent of respondents believe 2026 will be better than 2025. Thirty-seven percent of respondents believe 2026 will be the same as 2025, and 19 percent believe 2026 will be worse than 2025. The resulting diffusion index for the 2026 outlook is 62.4 percent, compared with 63.5 percent for 2025.

Services
Services survey respondents are slightly less optimistic compared to their predictions for 2025. The same proportion of respondents this year believe 2026 will be better than 2025. This is countered by a increase in the proportion of respondents indicating that 2026 will be worse. The diffusion index for the 2026 outlook of 60.8 percent is lower than the diffusion index going into 2025 (63.7 percent).

SPECIAL QUESTION TOPIC #1: ARTIFICIAL INTELLIGENCE APPLICATIONS USED

We asked the Business Survey panelists, "My supply chain organization uses the following AI applications:"

Respondents indicated:

SPECIAL QUESTION TOPIC #2: NEW AI RELATED ROLES

We asked, "Has your organization created any new AI-related roles?"

Respondents indicated:

SPECIAL QUESTION TOPIC #3: AI CHANGE TO THE QUALITY OF WORK

We asked, "How has the quality of work (lack of errors) changed with AI use?"

Respondents indicated:

SPECIAL QUESTION TOPIC #4: EFFECT OF OBBBA ACT ON CAPITAL EXPENDITURES

We asked, "What effect, if any, have the full expensing provisions in the "One Big Beautiful Bill Act (OBBBA)" had or are expected to have on your organization's capital expenditure activities and plans?"

Respondents indicated:

SPECIAL QUESTION TOPIC #5: PRICE CHANGE IN RESPONSE TO TARIFFS

We asked, "How do you plan to change your selling prices for products or services in response to tariffs?"

Respondents indicated:

SPECIAL QUESTION TOPIC #6: TIMING OF TARIFFS IN ORDER TO RAISE PRICES

We asked, "How long will tariffs have to be in place for products or services impacted by tariffs before you raise your prices?"

Respondents indicated:

SPECIAL QUESTION TOPIC #7: OTHER STRATEGIES IN RESPONSE TO TRADE POLICIES

We asked, "Besides raising prices, what other strategies are you implementing in response to recent or anticipated changes in trade policies?"

Respondents indicated:

SPECIAL QUESTION TOPIC #8: RESHORING PLANS

We asked, "In the next six months, does your organization plan to reshore final or intermediate production from abroad?"

Respondents indicated:

SUMMARY

Manufacturing
The manufacturing sector contracted in November for the ninth consecutive month, and the forecast indicates this trend may reverse in the first half of 2026 with continued strengthening in the second half.

• Operating rate is currently at 82.4 percent.
• Production capacity increased by 2.8 percent in 2025.
• Production capacity is expected to increase by 5.2 percent in 2026.
• Capital expenditures increased 3.5 percent in 2025.
• Capital expenditures are expected to increase 3 percent in 2026.
• Prices paid increased 5.4 percent in 2025.
• Overall, 2026 prices paid are expected to increase 4.4 percent.
• Labor and benefit costs are expected to increase 2.5 percent in 2026.
• Manufacturing employment is predicted to increase 0.4 percentage point in 2026.
• U.S. exports growth expected in 2026.
• U.S. imports expected to stay the same in 2026.
• The U.S. dollar is expected to strengthen in two of the seven major trading partners in 2026.
• Manufacturing revenues increased 2.5 percent in 2025.
• Manufacturing revenues are expected to increase 4.4 percent in 2026.
• Manufacturing supply managers have a positive outlook, with 44 percent of respondents predicting 2026 will be better than 2025, and 19 percent of respondents predicting 2026 will be worse than 2025.

Services
The services sector grew for the second month in a row in November, and the forecast indicates continued expansion in 2026.

• Operating rate is currently at 90.2 percent.
• Production capacity increased 3 percent in 2025.
• Production and provision capacity is expected to increase 2.1 percent in 2026.
• Capital expenditures increased 3.9 percent in 2025.
• Capital expenditures are expected to increase 2.5 percent in 2026.
• Prices paid increased 3.6 percent in 2025.
• Prices paid are expected to increase 4.2 percent in 2026.
• Labor and benefit costs are expected to increase 3.2 percent in 2026.
• Employment is expected to increase 2.5 percent in 2026.
• Export levels expected to increase in 2026.
• Import reduction expected in 2026.
• Services revenues are up 4.2 percent in 2025.
• Services revenues are expected to rise 4.6 percent in 2026.
• Services supply managers are positive in their outlook, with 39 percent of respondents predicting 2026 will improve compared to 2025.

*Miscellaneous Manufacturing includes items such as medical equipment and supplies, jewelry, sporting goods, toys and office supplies.

**Other Services include services such as equipment and machinery repairing; promoting or administering religious activities; grant making; advocacy; and providing dry-cleaning and laundry services, personal care services, death care services, pet care services, photofinishing services, temporary parking services, and dating services.

About This Report
The data presented herein is obtained from a survey of manufacturing and services supply executives nationwide during November 2025 based on information they have collected within their respective organizations. ISM^® makes no representation, other than that stated within this release, regarding the individual company data collection procedures. The data should be compared to all other economic data sources when used in decision-making.

Data and Method of Presentation
In addition to this forecast, the Manufacturing ISM^® PMI^® Report is issued monthly and is considered by many economists to be the most reliable near-term economic barometer available. It is reviewed regularly by government agencies and economic business leaders. The report, compiled from responses to questions asked of purchasing and supply executives across the country, tracks industrial production, new orders, inventories, supplier deliveries, imports, exports, backlog of orders, employment, customers' inventories, buying policies and prices. The report has been issued by the association since 1931, except during World War II. The composition of the Manufacturing Business Survey Panel is stratified according to the North American Industry Classification System (NAICS) and each of the following NAICS-based industry's contribution to gross domestic product (GDP): Food, Beverage & Tobacco Products; Textile Mills; Apparel, Leather & Allied Products; Wood Products; Paper Products; Printing & Related Support Activities; Petroleum & Coal Products; Chemical Products; Plastics & Rubber Products; Nonmetallic Mineral Products; Primary Metals; Fabricated Metal Products; Machinery; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Furniture & Related Products; and Miscellaneous Manufacturing (products such as medical equipment and supplies, jewelry, sporting goods, toys and office supplies). The data are weighted based on each industry's contribution to GDP. According to BEA estimates (the average of the fourth quarter 2023 GDP estimate and the GDP estimates for first, second, and third quarter 2024, as released on December 19, 2024), the six largest manufacturing industries are: Chemical Products; Transportation Equipment; Computer & Electronic Products; Food, Beverage & Tobacco Products; Machinery; and Petroleum & Coal Products.

Covering the services sector, ISM debuted the Services ISM^® PMI^® Report in June 1998. The Services ISM PMI^® Report is released on the third business day of each month and is based on data received from purchasing and supply executives across the country. The report covers business activity, new orders, backlog of orders, new export orders, inventory change, inventory sentiment, imports, prices, employment and supplier deliveries. The Services Business Survey Panel responses are divided into the following NAICS code categories: Agriculture, Forestry, Fishing & Hunting; Mining; Utilities; Construction; Wholesale Trade; Retail Trade; Transportation & Warehousing; Information; Finance & Insurance; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Management of Companies & Support Services; Educational Services; Health Care & Social Assistance; Arts, Entertainment & Recreation; Accommodation & Food Services; Public Administration; and Other Services (services such as Equipment & Machinery Repairing; Promoting or Administering Religious Activities; Grantmaking; Advocacy; and Providing Dry-Cleaning & Laundry Services, Personal Care Services, Death Care Services, Pet Care Services, Photofinishing Services, Temporary Parking Services, and Dating Services). The data are weighted based on each industry's contribution to GDP. According to BEA estimates (the average of the fourth quarter 2023 GDP estimate and the GDP estimates for first, second, and third quarter 2024, as released on December 19, 2024), the six largest services sectors are: Real Estate, Rental & Leasing; Public Administration; Professional, Scientific & Technical Services; Health Care & Social Assistance; Information; and Finance & Insurance.

The industries reporting growth, as indicated in the Manufacturing and Services ISM^® PMI^® Reports, and in this Supply Chain Planning Forecast, are listed in the order of most growth to least growth. For the industries reporting contraction or decreases, those are listed in the order of the highest level of contraction/decrease to the least level of contraction/decrease.

ISM ROB Content
The Institute for Supply Management^® ("ISM") PMI^® Reports (both Manufacturing and Services) ("ISM PMI") contains information, text, files, images, images, video, sounds, musical works, works of authorship, applications, and any other materials or content (collectively, "Content") of ISM ("ISM PMI Content"). ISM PMI Content is protected by copyright, trademark, trade secret, and other laws, and as between you and ISM, ISM owns and retains all rights in the ISM PMI Content. ISM hereby grants you a limited, revocable, nonsublicensable license to access and display on your individual device the ISM PMI Content (excluding any software code) solely for your personal, non-commercial use. The ISM PMI Content may also contain Content of users and other ISM licensors. Except as provided herein or as explicitly allowed in writing by ISM, you may not copy, download, stream, capture, reproduce, duplicate, archive, upload, modify, translate, publish, broadcast, transmit, retransmit, distribute, perform, display, sell, or otherwise use any ISM PMI Content.

Except as explicitly and expressly permitted by ISM, you are strictly prohibited from creating works or materials (including but not limited to tables, charts, data streams, timeseries variables, fonts, icons, link buttons, wallpaper, desktop themes, on-line postcards, montages, mash-ups and similar videos, greeting cards, and unlicensed merchandise) that derive from or are based on the ISM PMI Content. This prohibition applies regardless of whether the derivative works or materials are sold, bartered, or given away. You may not either directly or through the use of any device, software, internet site, web-based service, or other means remove, alter, bypass, avoid, interfere with, or circumvent any copyright, trademark, or other proprietary notices marked on the Content or any digital rights management mechanism, device, or other content protection or access control measure associated with the Content including geo-filtering mechanisms. Without prior written authorization from ISM, you may not build a business utilizing the Content, whether or not for profit.

You may not create, recreate, distribute, incorporate in other work, or advertise an index of any portion of the Content unless you receive prior written authorization from ISM. Requests for permission to reproduce or distribute ISM PMI Content can be made by contacting in writing at: ISM Research, Institute for Supply Management, 309 W. Elliot Road, Suite 113, Tempe, AZ 85284, or by emailing [email protected], Subject: Content Request.

ISM shall not have any liability, duty, or obligation for or relating to the ISM PMI Content or other information contained herein, any errors, inaccuracies, omissions or delays in providing any ISM PMI Content, or for any actions taken in reliance thereon. In no event shall ISM be liable for any special, incidental, or consequential damages arising out of the use of the ISM PMI. Manufacturing PMI^® and Services PMI^® are registered trademarks of Institute for Supply Management^®. Institute for Supply Management^® and ISM^® are registered trademarks of Institute for Supply Management, Inc.

About Institute for Supply Management^®
Institute for Supply Management^® (ISM^®) is the first and leading not-for-profit professional supply management organization worldwide. Its community of more than 50,000 in more than 100 countries manages about US$1 trillion in corporate and government supply chain procurement annually. Founded in 1915 by practitioners, ISM is committed to advancing the practice of supply management to drive value and competitive advantage for its members, contributing to a prosperous and sustainable world. ISM empowers and leads the profession through the ISM^® PMI^® Reports, its highly regarded certification and training programs, corporate services, events and assessments. The ISM^® PMI^® Reports, Manufacturing, and Services are two of the most reliable economic indicators available, providing guidance to supply management professionals, economists, analysts, and government and business leaders. For more information, please visit: www.ismworld.org.

The full text version of each report is posted on ISM's Home Page at www.ismworld.org on the first and third business days* of every month after 10:00 a.m. (ET). The one exception is in January, the reports are released on the second and fourth business day of the month.

The next Manufacturing ISM^® PMI^® Report featuring December 2025 data will be released at 10:00 a.m. ET on Monday, January 5, 2026.

The next Services ISM^® PMI^® Report featuring December 2025 data will be released at 10:00 a.m. ET on Wednesday, January 7, 2026.

*Unless the NYSE is closed.

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SOURCE Institute for Supply Management