Economic improvement in the United States will continue in 2026, according to the Institute for Supply Management (ISM) 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% in the manufacturing sector (after a 3.5% increase in 2025) and increase by 2.5% in the services sector (after a 3.9% increase in 2025). In 2026, employment is expected to grow by 0.4 percentage point in manufacturing and 2.5% in services. After projected growth in manufacturing and services in H1/25, growth in H2/25 is projected to accelerate in manufacturing and slightly decrease momentum in the services sector.
These projections are part of the forecast issued by ISM Business Survey panelists. The forecast was released by Susan Spence, chair of the ISM manufacturing business survey committee, and by Steve Miller, chair of the ISM services business survey committee.
Manufacturing Summary
Expectations for 2026 are positive, as 56% of survey respondents expect revenues to be greater in 2026 than in 2025. The panel of purchasing and supply executives expects a 4.4% 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 and tobacco products; fabricated metal products; miscellaneous manufacturing; computer and electronic products; chemical products; petroleum and coal products; nonmetallic mineral products; transportation equipment; primary metals; machinery; paper products; furniture and related products; wood products; textile mills; plastics and rubber products; and electrical equipment, appliances and 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% of normal capacity, up 3.2 percentage from the 79.2% reported in May 2025. Purchasing and supply executives predict that capital expenditures will increase year over year by 3% in 2026, compared to a 3.5% 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%. 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% during the first five months of the year, with an overall increase of 4.4% for 2026. This compares favorably to a reported 5.4% 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% net increase in overall revenues for 2026, compared to a 4.2% 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 and leasing; information; professional, scientific and technical services; wholesale trade; health care and social assistance; accommodation and food services; other services; finance and insurance; arts, entertainment and recreation; retail trade; public administration; transportation and warehousing; utilities; mining; construction; and educational services.
“Services supply executives report operating at 90.2% of normal capacity, more than the 86.5% 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% 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,” Miller said.
Respondents expect the prices they pay for materials and services to increase by 4.2% during 2026. They also forecast that their overall labor and benefit costs will increase 3.2%. Profit margins decreased slightly in the second and third quarters of 2025, but respondents expect growth between now and May 2026.
