US manufacturing capex, hiring set to rise in 2026: ISM forecast
Manufacturing capital expenditures in US are forecast to rise 3 per cent in 2026, following a 3.5 per cent increase in 2025, while employment is also set to expand, with manufacturing headcount expected to grow by 0.4 percentage point, according to the Institute for Supply Management’s (ISM) December 2025 Supply Chain Planning Forecast.
The outlook reflects improving confidence among purchasing and supply management executives, with revenues expected to increase in 16 of 18 manufacturing industries in 2026. ISM noted that after moderate growth in the first half of the year, manufacturing activity is projected to accelerate in the second half, ISM said in a press release.
In manufacturing, 56 per cent of survey respondents expect revenues to be higher in 2026 than in 2025, with overall manufacturing revenues forecast to rise by a net 4.4 per cent, compared with a 2.5 per cent increase reported for 2025. Despite manufacturing remaining in contraction for the ninth consecutive month in November, executives remain optimistic about a turnaround as the year progresses.
Manufacturing capital expenditures in the US are forecast to rise 3 per cent in 2026 after a 3.5 per cent increase in 2025, while manufacturing employment is expected to grow 0.4 percentage point, according to ISM.
Revenues are projected to increase in most industries, with overall manufacturing revenues up 4.4 per cent.
A stronger second-half momentum supports cautious optimism for 2026.
Manufacturers reported operating at 82.4 per cent of normal capacity, up from 79.2 per cent in May 2025. Production capacity increased 2.8 per cent in 2025 and is expected to expand more sharply by 5.2 per cent in 2026, supported by additional hiring, investment in plant and equipment, longer operating hours, and the replacement of older machinery with more advanced technology.
While 2025 capital expenditures exceeded earlier expectations, rising 3.5 per cent on average, manufacturers anticipate a further 3 per cent increase in 2026. Apparel, transportation equipment, and machinery are among the industries forecasting higher capital outlays next year.
Prices paid for raw materials rose 5.4 per cent in 2025 and are forecast to increase by a net 4.4 per cent in 2026. Labour and benefit costs are expected to rise 2.5 per cent, reflecting continued wage pressures amid a tightening labour market.
On trade, manufacturers expect export activity to increase in the first half of 2026, while imports are projected to remain broadly unchanged. Inventory-to-sales ratios are forecast to edge lower, indicating continued focus on inventory discipline and working capital management, added the release.
Despite expectations of growth, survey respondents are less optimistic about 2026 than they were about 2025 a year earlier. Forty-four per cent believe 2026 will be better than 2025, 37 per cent expect conditions to remain the same, and 19 per cent believe 2026 will be worse. The resulting diffusion index for the 2026 outlook stands at 62.4 per cent, slightly lower than the 63.5 per cent recorded for 2025, suggesting cautious optimism amid lingering economic and cost uncertainties.
Fibre2Fashion News Desk (SG)
