U.S. manufacturing leaders are heading into 2026 with a cautiously optimistic outlook, according to the Institute for Supply Management’s December 2025 Supply Chain Planning Forecast. Purchasing and supply executives expect broad-based revenue gains across most manufacturing segments, improved capacity utilization and modest employment growth, underscoring a shift from recent contraction toward more consistent expansion.

Despite near-term headwinds — including persistent raw materials pricing pressure and ongoing contractionary readings in monthly PMI data — respondents express increasing confidence that business prospects will improve through the year, with momentum building into the second half of 2026.

Survey commentary from ISM panelists highlights that while optimism isn’t exuberant, it reflects a pragmatic assessment of conditions as companies navigate lingering inflationary dynamics, supply chain uncertainties and evolving global trade patterns.

“It’s encouraging to see that we have some optimism for next year, especially given the last few months of chaos and wringing of hands,” Susan Spence, MBA, Chair of the ISM Manufacturing Business Survey Committee, told a conference call of reporters on Dec. 16. “I think folks are trying to be optimistic that the chaos is actually going to be over with (a looming U.S. Supreme Court) ruling one way or the other, so they will know what their companies are going to do.”

Manufacturing Scorecard: ISM 2026 Outlook

Here’s a rundown of the key manufacturing sector findings from the December 2025 ISM Supply Chain Planning Forecast:

Revenue expectations:

• 56% of respondents anticipate higher revenues in 2026 vs. 2025
• ISM projects a 4.4% net increase in manufacturing revenues in 2026, up from the 2.5-point increase reported for 2025
• 16 of 18 manufacturing industries forecast revenue improvement in 2026, with the top five sectors as: Food, Beverage & Tobacco Products; Fabricated Metal Products; Miscellaneous Manufacturing; Computer & Electronic Products; and Chemical Products.

Capacity utilization:

• Firms report operating at 82.4% of normal capacity, an increase from 79.2% in May 2025

Capital expenditures:

• Capital spending is expected to climb 3% in 2026, following a 3.5% rise in 2025

Employment and labor costs:

• Employment is projected to grow 0.4 percentage points in 2026 relative to December 2025
• Labor and benefit costs are expected to increase roughly 2.5%

Raw materials pricing:

• Executives forecast raw materials prices to rise 5.4% in the first five months of 2026 and about 4.4% for the full year, modestly easing from 2025’s 5.4% increase

Trade expectations:

• Manufacturers anticipate export growth in 2026, while imports hold steady, signaling balanced external demand conditions

Reshoring:

• 64% of respondents reported that their companies are not looking to shift sourcing/production to the U.S. from abroad or are looking for alternative trader partners overseas

AI Usage:

• 32% of respondents said their company has created AI-related roles across their organization, in some departments or in pilot groups. Another 11% indicated plans to do so.

Executive Sentiment and Strategic Signals

An ISM summary blog also published on Dec. 16 reinforces the nuanced tone of the forecast — executives are encouraged by the prospect of accelerating activity into 2026, but are also pragmatic about uncertainties. Survey participants noted that while growth is expected, its pace may be tempered by unresolved questions around inflation, pricing pressures and global economic conditions, reflecting a measured confidence rather than outright bullishness.

“Optimism abounds right now, but that was the case last year before the dip in May,” Spence acknowledged. “We’re going to again be looking to the (Trump administration’s) policy decisions, and hopefully the (results) of those decisions will support the optimism that people seem to be feeling right now. It’s not huge optimism; it’s slight optimism. But we’ll take it.”