ISM Reports Economic Activity Will Expand Through 2026
According to the Institute for Supply Management, economic activity in the Manufacturing and services sectors are Expected to Expand in 2026. Manufacturing revenue is forecast to increase by 8.4%, and services revenue is expected to increase by 8.6%.

The U.S. economy is expected to continue to expand over the rest of 2026, say the nation’s purchasing and supply executives in the Spring 2026 ISM Supply Chain Planning Forecast (formerly known as the Spring ISM Semiannual Economic Forecast). Expectations for the remainder of 2026 are higher than those expressed in December 2025. The U.S. economy continues to successfully battle the headwinds posed by trade issues, continued inflation concerns and geopolitical uncertainty.

These projections are part of the forecast issued by Institute for Supply Management (ISM) business survey panelists. The forecast was presented today by Susan Spence, chair of the ISM manufacturing business survey committee, and Steve Miller, chair of the ISM services business survey committee.

Manufacturing Summary

Revenue for 2026 is expected to increase, on average, by 8.4%. This is 4 percentage points higher than the December 2025 forecast of 4.4%, and 5.9 percentage points higher than the 2.5 percentage point year-over-year increase reported for 2025. Eighty-two% of respondents say that revenues for 2026 will increase, on average, 12.7% compared to 2025. Seventeen% say revenues will decrease (12%, on average), and zero% indicate no change. With an operating rate of 86.9%, a projected 4.9% increase in capital expenditures, a 14.1-percent increase in prices paid for raw materials and a marginal (1.4%) increase in employment expected by the end of 2026, the manufacturing sector will continue to grow through 2026. “With 14 manufacturing industries expecting revenue growth and seven industries expecting employment growth in 2026, panelists forecast a healthy rest of the year. Sentiment in each industry was generally consistent with performance reports in the May 2026 Manufacturing ISM PMI Reports, as well as the fall ISM Supply Chain Planning Forecast released in December,” says Spence.

The 14 of 18 industries that report projected revenue increases for the rest of 2026, listed in order, are: Nonmetallic Mineral Products; Paper Products; Primary Metals; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Printing & Related Support Activities; Transportation Equipment; Food, Beverage & Tobacco Products; Computer & Electronic Products; Furniture & Related Products; Miscellaneous Manufacturing; Machinery; and Chemical Products.

Services Summary

Respondents expect 8.6% growth in revenues in 2026, 4 percentage points higher than the 4.6-percent increase forecast in December 2025. Eighty-one% of respondents say that revenues for 2026 will increase, on average, 12.9% compared to 2025. Meanwhile, 15% expect their revenues to decrease (11.3%, on average), and 4% indicate no change. “The services sector will continue to lead the economy in 2026. Services companies are currently operating at 91.3% of normal capacity. Supply managers indicate that prices are expected to increase 8.9% over the year, reflecting increasing inflation. Employment is projected to grow only slightly (0.9 percentage point). Sixteen industries forecast increased revenues, the same as predicted in in December 2025,” says Miller.

The 16 services industries projecting revenue increases in 2026, listed in order, are: Mining; Retail Trade; Finance & Insurance; Wholesale Trade; Arts, Entertainment & Recreation; Other Services; Real Estate, Rental & Leasing; Public Administration; Information; Utilities; Professional, Scientific & Technical Services; Health Care & Social Assistance; Management of Companies & Support Services; Accommodation & Food Services; Educational Services; and Transportation & Warehousing.

OPERATING RATE

Manufacturing

Purchasing and supply executives report that their companies are operating, on average, at 86.9% of normal capacity, 4.5 percentage points higher than the figure reported in December 2025. The six industries reporting operating capacity levels above the average rate of 86.9% — listed in order — are: Nonmetallic Mineral Products; Paper Products; Primary Metals; Transportation Equipment; Computer & Electronic Products; and Fabricated Metal Products.

Services

Organizations are operating, on average, at 91.3% of normal capacity, according to Business Survey panelists. This is 1.1 percentage points higher compared to December 2025. The eight industries operating at capacity levels above the average rate of 91.3% — listed in order — are: Mining; Retail Trade; Educational Services; Utilities; Finance & Insurance; Professional, Scientific & Technical Services; Health Care & Social Assistance; and Transportation & Warehousing.

*All June data reflects a reissued survey following a technical data-capture issue identified during final quality checks in May.

PRODUCTION CAPACITY

Manufacturing

Production capacity is expected to increase 9.7% in 2026. In December, panelists reported an increase of 2.8 percentage points for 2025 and projected an increase of 5.2% this year. Seventy-six% of respondents expect capacity increases in 2026. Sixteen% expect decreases, on average, of 13.6%; and 8% expect no change. The 14 industries expecting increased production capacity in 2026 — listed in order — are: Nonmetallic Mineral Products; Wood Products; Printing & Related Support Activities; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Fabricated Metal Products; Miscellaneous Manufacturing; Plastics & Rubber Products; Primary Metals; Chemical Products; Machinery; Furniture & Related Products; and Food, Beverage & Tobacco Products.

Services

The capacity to produce products or provide services in the services sector is expected to increase 7.1% in 2026. This compares to an increase of 3% reported for 2025 and a December projection of a 2.1-percent increase for this year. Seventy-nine% of services respondents expect their capacity for 2026 to increase, on average, 13.6%, and 14% foresee capacity decreasing, on average, 25.3%. Seven% expect no change in capacity. The 15 industries expecting production capacity increases for 2026 — listed in order — are: Mining; Retail Trade; Construction; Arts, Entertainment & Recreation; Management of Companies & Support Services; Accommodation & Food Services; Real Estate, Rental & Leasing; Wholesale Trade; Transportation & Warehousing; Professional, Scientific & Technical Services; Information; Educational Services; Health Care & Social Assistance; Utilities; and Public Administration.

PREDICTED CAPITAL EXPENDITURES — 2026 vs. 2025

Manufacturing

Survey respondents expect a 4.9% increase in capital expenditures in 2026, 1.9 percentage points higher than the 3% increase forecast by the panel in December. Sixty% of respondents predict increased capital expenditures in 2026, 34% said their capital spending will decrease (on average, 23.7%), and 6% expect no change. The 10 industries expecting an increase in capital expenditures for 2026 — listed in order — are: Nonmetallic Mineral Products; Primary Metals; Printing & Related Support Activities; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Transportation Equipment; Fabricated Metal Products; Machinery; and Food, Beverage & Tobacco Products.

Services

This year, services purchasing and supply executives expect capital expenditures to increase 6.4% compared to 2025. The 70% of respondents expecting to spend more predict an average increase of 14.4%, 23% anticipate an average decrease of 15.5%, and 7% expect no change in capital expenditures in 2026. The 15 industries expecting an increase in capital expenditures, in order, are: Mining; Retail Trade; Construction; Arts, Entertainment & Recreation; Agriculture, Forestry, Fishing & Hunting; Other Services; Public Administration; Information; Health Care & Social Assistance; Wholesale Trade; Utilities; Educational Services; Professional, Scientific & Technical Services; Finance & Insurance; and Transportation & Warehousing.

PRICES — Changes Between End of 2025 and June 2026

Manufacturing

In the December forecast, respondents predicted an increase of 5.4% in prices paid during the first four months of 2026; they now report price increases by 11.9%. Ninety-four% of respondents reported that their prices are higher now than at the end of 2025 with an average increase of 13.3% for the early months of 2026. Five% of respondents reported lower prices (by 13.7%, on average). The remaining 1% indicated no change for the period. Seventeen manufacturing industries reported an increase in prices paid for the first part of 2026, in the following order: Nonmetallic Mineral Products; Paper Products; Primary Metals; Transportation Equipment; Computer & Electronic Products; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Wood Products; Plastics & Rubber Products; Furniture & Related Products; Printing & Related Support Activities; Apparel, Leather & Allied Products; Petroleum & Coal Products; Machinery; Chemical Products; Food, Beverage & Tobacco Products; and Miscellaneous Manufacturing.

Services

Services respondents report that purchases during the first five months of this year cost an average of 7.7% more than at the end of 2025. This is more than double the percentage increase predicted in December (3.8%). Ninety-four% of services respondents report that prices increased, on average, 9.8%; 5% report price decreases of, on average, 26.1%; and 1% indicate no change. All 18 industries reported an increase in prices paid in the first part of 2026, listed in order: Mining; Educational Services; Finance & Insurance; Transportation & Warehousing; Construction; Public Administration; Arts, Entertainment & Recreation; Management of Companies & Support Services; Agriculture, Forestry, Fishing & Hunting; Other Services; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Health Care & Social Assistance; Utilities; Wholesale Trade; Information; Retail Trade; and Accommodation & Food Services.

Prices: Predicted Changes Between End of 2025 and End of 2026

Manufacturing

Survey respondents expect a year-over-year, net-average prices increase of 14.1% for 2026. With respondents reporting price increases of 11.9%, prices are projected to continue to increase for the rest of the year. Ninety-seven% of respondents project prices to increase, on average, 14.6% for the full year, 2% anticipate a decrease (4.7%, on average), and 1% expect no change. The 17 industries expecting price increases for all of 2026, listed in order, are: Nonmetallic Mineral Products; Paper Products; Primary Metals; Transportation Equipment; Fabricated Metal Products; Machinery; Electrical Equipment, Appliances & Components; Wood Products; Plastics & Rubber Products; Furniture & Related Products; Printing & Related Support Activities; Apparel, Leather & Allied Products; Petroleum & Coal Products; Chemical Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; and Miscellaneous Manufacturing.

Services

This year, services respondents expect prices to increase, on average, 8.9% compared to the end of 2025. With respondents reporting an increase of 7.7% through June 2026, prices are projected to increase somewhat over the rest of the year. Ninety-five% of respondents anticipate increases of, on average, 10.5%; 3% expect decreases of, on average, 41%; and 2% do not expect prices to change. All 18 industries project price increases for all of 2026, listed in order: Mining; Retail Trade; Educational Services; Finance & Insurance; Health Care & Social Assistance; Transportation & Warehousing; Construction; Arts, Entertainment & Recreation; Management of Companies & Support Services; Accommodation & Food Services; Agriculture, Forestry, Fishing & Hunting; Other Services; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Public Administration; Utilities; Wholesale Trade; and Information.

EMPLOYMENT

Employment — Predicted Changes Between End of 2025 and End of 2026

Manufacturing

ISM’s Manufacturing Business Survey panelists forecast that sector employment in 2026 will increase 1.4 percentage points year over year. Forty-nine% of respondents expect employment to be, on average, 7.6% higher; 41% predict employment to decrease, on average, 5.8%; and 10% expect employment levels to be unchanged. The seven industries projecting employment growth during 2026 — listed in order — are: Electrical Equipment, Appliances & Components; Printing & Related Support Activities; Furniture & Related Products; Computer & Electronic Products; Machinery; Transportation Equipment; and Food, Beverage & Tobacco Products.

Services

Sector employment will increase 0.9 percentage point in 2026, according to the forecast of ISM’s Services Business Survey panelists. For the rest of the year, 53% expect employment to increase, on average, 7.7%; 30% anticipate employment to decrease, on average, 10.7%; and 17% expect no change in employment levels. The nine industries anticipating increases in employment — in the following order — are: Retail Trade; Construction; Arts, Entertainment & Recreation; Real Estate, Rental & Leasing; Wholesale Trade; Professional, Scientific & Technical Services; Utilities; Information; and Educational Services.

BUSINESS REVENUES

Business Revenues Comparison — 2026 vs. 2025

Manufacturing

Revenues are expected to increase this year as purchasing and supply management executives predict an overall net increase of 8.4% compared to 2025. This is 4 percentage points higher than the 4.4-percent increase forecast in December, and 5.9 percentage points higher than the 2.5-percentage point year-over-year increase reported for 2025. Eighty-two% of respondents say that revenues for 2026 will increase, on average, 12.7%; 17% say their revenues will decrease, on average, 12%; and 0% forecast no change. The 14 manufacturing industries expecting increases in revenue in 2026 — listed in order — are: Nonmetallic Mineral Products; Paper Products; Primary Metals; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Printing & Related Support Activities; Transportation Equipment; Food, Beverage & Tobacco Products; Computer & Electronic Products; Furniture & Related Products; Miscellaneous Manufacturing; Machinery; and Chemical Products.

Services

Services purchasing and supply management executives predict growth in sector business revenue compared to 2025. They forecast an increase of 8.6%, much higher than the 4.6-percent increase forecast in December, and 4.4 percentage points higher than the 4.2-percent increase reported for 2025. Eighty-one% of respondents indicate revenues for 2026 will increase, on average, 12.9%; 16% say their revenues will decrease, on average, 11.3%; and 4% expect no change. Sixteen of 18 services industries project revenue increases in 2026, listed in order: Mining; Retail Trade; Finance & Insurance; Wholesale Trade; Arts, Entertainment & Recreation; Other Services; Real Estate, Rental & Leasing; Public Administration; Information; Utilities; Professional, Scientific & Technical Services; Health Care & Social Assistance; Management of Companies & Support Services; Accommodation & Food Services; Educational Services; and Transportation & Warehousing.

SPECIAL QUESTION TOPIC No. 1: ADJUSTING INVENTORY STOCKING STRATEGIES AMID GLOBAL TARIFF UNCERTAINTY

We asked panelists, “Have you changed your company’s inventory stocking requirements to manage input pricing risks from global tariff negotiations and actions?”

Answer options:

• Yes, we are requiring higher levels of inventory
• Yes, we are requiring lower levels of inventory
• No, we haven’t changed our requirements
• Do not measure input inventories

Respondents indicated:

SPECIAL QUESTION TOPIC No. 2: PRICE ADJUSTMENTS IN RESPONSE TO TARIFFS

We asked panelists, “How do you plan to change your selling prices for products or services in response to tariffs?”

Answer options:

• We plan to pass on all of the cost increases into sales prices
• We plan to pass on some of the cost increases into sales prices and to absorb some through reduced margins
• We plan to pass on some of the cost increases into sales prices and to pass on the rest to other untariffed products or services we provide
• We plan to absorb all of cost increases through reduced margins
• Our costs will not be affected by tariffs, but we plan to use tariffs as an opportunity to raise prices
• Our costs will not be affected by tariffs, and we do not plan to change prices because of tariffs

Respondents indicated:

SPECIAL QUESTION TOPIC No. 3:

ALTERNATIVE STRATEGIES TO NAVIGATE TRADE POLICY CHANGES

We asked panelists, “Besides raising prices, what other strategies are you implementing in response to recent or anticipated changes in trade policies?”

Answer options:

• We plan to increase inventory of imported inputs
• We plan to change the mix of products we sell
• We plan to change the specifications of products we sell
• We plan to reshore production domestically or move it to other countries
• Other (reasons)

Respondents indicated:

SPECIAL QUESTION TOPIC No. 4: PLANS TO RESHORE PRODUCTION

We asked panelists, “In the next six months, does your organization plan to reshore final or intermediate production from abroad?”

Answer options:

• Yes, we are actively looking into shifting production to the U.S. from abroad
• Yes, we are actively looking into shifting production domestically, but our plan will take longer than six months
• No, we are not reshoring to the domestic market but looking for alternative trade partners in less tariff-impacted countries
• No, we are not looking into changing our supply chain partners

Respondents indicated:

SPECIAL QUESTION TOPIC No. 5:

EFFECT OF OIL PRICES

We asked panelists, “What will be the effect of the rising oil prices on your business?”

Answer options:

• Large positive effect.
• Small positive effect.
• Small negative effect.
• Large negative effect.

SPECIAL QUESTION TOPIC No. 6:

RESPONSE TO OIL PRICE SHOCK

We asked panelists, “How do you plan to change your selling prices for products or services in response to the recent oil price shock?”

Answer options:

• We plan to pass on all of the cost increases into sales prices.
• We plan to pass on some of the cost increases into sales prices and to absorb some through reduced margins.
• We plan to pass on some of the cost increases into sales prices and to pass on the rest to other unaffected products or services we provide.
• We plan to absorb all of cost increases through reduced margins.
• Our costs will not be affected by the oil price shock, but we plan to use it as an opportunity to raise prices.
• Our costs will not be affected by the oil price shock, and we do not plan to change prices because of it.

SPECIAL QUESTION TOPIC No. 7:

OVERALL EFFECT OF AI ON EMPLOYMENT

We asked panelists, “What has been the overall effect of AI on employment of your business?”

Answer options:

• We are planning some layoffs after the introduction of AI.
• We are currently not hiring because of AI.
• We have created new position after the introduction of AI.
• AI so far hasn’t had noticeable effects on hiring/layoff decisions at our business.

SPECIAL QUESTION TOPIC No. 8:SELECT AI TOOLS BEING USED

We asked panelists, “Which of the following AI tools are you using at your business?”

Answer options*:

• We don’t use AI at our business.
• We use generative AI chatbots.
• We use AI agents.

*Percentages add to more than 100% because respondents were able to select one or more of the following choices:

“We use generative AI chatbots.”

“We use AI agents.”

“Other.”

SUMMARY

Manufacturing

• Operating rate is 86.9% of normal capacity.
• Production capacity is expected to increase 9.7% in 2026.
• Capital expenditures are expected to increase 4.9% in 2026.
• Prices paid increased 11.9% through June 2026.
• Prices of raw materials are expected to increase a total of 14.1% for all of 2026, indicating an expected increase of 2.2 percentage points for the rest of the year.
• Manufacturing employment is expected to increase 1.4% in 2026.
• Manufacturing revenues are expected to increase 8.4% in 2026.
• The manufacturing sector is expected to grow in 2026.

Services

• Operating rate is 91.3% of normal capacity.
• Production capacity is expected to increase 7.1% in 2026.
• Capital expenditures are expected to increase 6.4% in 2026.
• Prices paid increased 7.7% through June 2026.
• Prices of raw materials are expected to increase a total of 8.9% for all of 2026, indicating expectations of continuing inflation.
• Services employment is expected to increase 0.9 percentage point in 2026.
• Services revenues are expected to increase 8.6% in 2026.
• The services sector is projected to grow in 2026.