ISM forecast sees a manufacturing rebound in 2026 as services maintain steady expansion

While economic conditions for the manufacturing and services sectors are mixed, both are expected to see growth in 2026, at different paces, according to the new edition of the Institute for Supply Management’s (ISM) Supply Chain Planning Forecast, which was issued today.

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 manufacturing revenue is expected to rise 2.5% in 2025, outpacing a 1.3% growth estimate from its previous report in May, with a 4.4% increase in 2026, supported by 56% of respondents expecting higher 2026 revenues. It added that revenue gains are expected for 16 of the 18 manufacturing sectors tracked by ISM, including: 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 capital expenditures (capex) saw a 3.5% gain in 2025, well ahead of a May estimate of 1.3% and are expected to be up 3% in 2026. ISM stated that the 31% of respondents reporting 2025 capex gains cited an average increase of 31.2%, with the 25% noting their capex was reduced by an average of 24.4%, with another 44% saying their capex levels were flat.

Other key manufacturing findings included:

• prices paid increased 5.4% in 2025 and are expected to rise 4.4% in 2026;
• manufacturing employment is expected to see a slight 0.4% gain in 2026, matching the 2025 reading;
• production capacity rose 2.8% in 2025 and is forecasted to be up by 5.2% in 2026;
• the manufacturing operating rate is at 82.4% of total capacity, ahead of May’s 79.2% tally; and
• the report expects manufacturing to return to growth in early 2026, with stronger gains expected in the second half of the year

“Manufacturing’s purchasing and supply executives expect to see overall growth in 2026,” wrote Susan Spence, Chair of the ISM Manufacturing Business Survey Committee. “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.”

Services outlook: ISM member panelists reported that they expect 2026 revenues to be up 4.6%, following a 4.2% gain in 2025, topping the flat, or 0% reading from May, with 54% of panelists indicating they expect revenues to be up. The report said that 55 percent of panelists cited higher 2025 revenues than in 2024, estimating an average revenue increase of 9.3%, matching the average decrease of 9.3%, which was reported by the 9 percent of respondents who report worse business in 2025. The remaining 36% saw no change in 2025, it said.

Services capex increased 3.9% in 2025, beating a 3.3% May estimate and 2024’s 2.8% gain, with a 2026 growth estimate of 2.5%. The report noted that 37% report capex increases averaging 15.4%, and 10% reporting decreases averaging 17.2%, with 53% observing the same capex amount, for both 2024 and 2025.

Other key services findings include:

• production capacity increased 3% in 2025, and production and provision capacity is expected to rise 2.1% in 2026;
• prices paid saw a 3.6% gain in 2026 and are expected to see a 4.2% 2026 gain;
• employment is pegged to rise 2.5% in 2026; and
• the report expects the services sector to see continued expansion in 2026

“Services supply executives report operating at 90.2% of normal capacity, more than the 86.5% reported in May 2025,” wrote Steve Miller, Chair of the ISM Services Business Survey Committee, in the report. “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% during 2026, and capital expenditures will increase by 2.5%. Services Business Survey Panel members also predict their overall employment will increase by 2.5% during 2026.”