ISM forecast indicates flat growth is expected for manufacturing and services sectors in 2025

A flattish outlook appears to be in the cards, for both the manufacturing and services sectors, according to the new edition of the Institute for Supply Management’s (ISM) December 2024 ISM Supply Chain Planning Forecast, which was issued earlier this month.

Data for this report is based on feedback from U.S.-based purchasing and supply chain executives in manufacturing and non-manufacturing sectors.

For manufacturing, ISM reported that 2025 revenue is expected to rise 0.1%, coming in 4.1% below its previous forecast, made in December, at 4.2%. It added that 34% of respondents expect 2025 revenues to grow, on average, 9.7% annually, with another 22% indicating revenues will decline 14.1%, and 44% expecting revenue to be flat. For 2025, the eight sectors expecting revenues to grow in 2025, according to the report, include: Primary Metals; Miscellaneous Manufacturing; Computer & Electronic Products; Chemical Products; Electrical Equipment, Appliances & Components; Printing & Related Support Activities; Food, Beverage & Tobacco Products; and Transportation Equipment.

Manufacturing capital expenditures (capex) is expected to decline 1.3% in 2025, coming in well below the expected 5.2% increase, which was forecasted in the December edition of the report. It also noted that 16% of respondents expect 2025 capex to increase, by 25.7% on average, with another 21% indicating it would decrease, by 26.3% on average, with 63% expecting 2025 capex to be flat.

Other key manufacturing findings included:

• prices paid 4.7% through April, beating a 3% forecast from December;
• manufacturing employment is expected to see a 0.1% 2025 decrease, below a previous forecast calling for 0.8% growth;
• production capacity is expected to head up 1.8% this year, in line with 2024’s 1.7% annual growth rate but below December’s 4% growth forecast for 2025;
• the manufacturing operating rate, at 79.2% of normal capacity, is below December’s 82.3 rate; and
• the report expects manufacturing to be flat or see slight growth in 2025

“With eight manufacturing industries expecting revenue growth in 2025 and eight industries expecting employment growth in 2025, panelists forecast a flat rest of the year,” observed Tim Fiore, Chair of the ISM Manufacturing Business Survey Committee. “Sentiment in each industry was generally consistent with performance reports in the April 2025 Manufacturing ISM Report On Business, as well as the fall ISM Supply Chain Planning Forecast conducted in December.”

Services outlook: ISM member panelists reported that they expect 2025 revenues to be flat, coming in 3.9% below the December forecast. It said that 33% of respondents are calling for growth, at an average of 9%, annually, with 18% expecting revenues to decrease by 16.6% on average, and the remaining 49% expecting a flat revenue outlook. For 2025, nine services sectors are forecasting increased revenues, down from the 17 industries that predicted increases in December.

Services capex are expected to head down 3.3% in 2025, with 15% expected to spend more by an average of 13.3%, and another 23.3% expecting it to decrease by an average of 23.5%, with 62% expecting no change.

Other key services findings include:

• production capacity is expected to fall 1.1% in 2025, following a 3.2% 2024 gain;
• prices paid saw a 4.3% gain through April, matching December’s forecast for this period;
• employment is pegged to decline 1.6% in 2025, below December’s 0.8% estimate; and
• the report expects the services sector to be flat in 2025

“The services sector will be flat for the rest of 2025. Services companies are currently operating at 86.5 percent of normal capacity,” wrote Steve Miller, Chair of the ISM Services Business Survey Committee, in the report. “Supply managers indicate that prices are expected to increase 7.3 percent over the year, reflecting increasing inflation. Employment is projected to decrease 1.6 percent. Nine industries forecast increased revenues, down from the 17 industries that predicted increases in December 2024.”