The Institute for Supply Management (ISM) has released its latest economic outlook, forecasting ongoing growth across United States manufacturing and services sectors in 2026. According to ISM’s December 2025 Supply Chain Planning Forecast, industry leaders see revenue gains, strategic capital spending, and steady employment growth shaping the economic landscape ahead. Let’s take a closer look at the projections and sector trends revealed in this influential report.
ISM Forecasts Continued Growth for Manufacturing and Services
The ISM report paints a positive outlook for both manufacturing and services in 2026. Executives in 16 of 18 manufacturing industries anticipate increased revenue, with an overall sector gain of 4.4% for the year. Similarly, 16 of 18 services industries expect to grow, projecting a robust 4.6% revenue increase. Manufacturing’s capacity utilization sits at 82.4%, while services have hit an impressive 90.2%. These statistics signal confidence in market expansion, especially notable as manufacturing aims to rebound from recent contractions. ISM panelists anticipate faster growth in manufacturing during the second half of the year, while services expect solid momentum early on with a slight pace decrease later.
Capital Expenditures, Prices, and Employment Trends in 2026
Turning to capital expenditures, ISM’s forecast reveals manufacturing will see a 3% increase in spending after a stronger-than-expected 3.5% rise in 2025. The services sector foresees a 2.5% jump, down slightly from this year’s 3.9% climb. Rising raw material and labor costs are also expected, with manufacturing prices paid for inputs up 4.4% and service-sector prices rising by 4.2%. Employment shows steady gains: manufacturing expects a 0.4 percentage point employment bump, while services anticipate a larger 2.5% increase. These trends highlight ongoing investments in talent, technology, and capacity as both sectors respond to shifts in global trade, supply chain resilience, and evolving customer needs.
Supply Chain Outlook: AI Adoption and Reshoring Strategies
The ISM survey spotlights a growing embrace of artificial intelligence (AI) in supply chain operations. A quarter of respondents in both manufacturing and services are piloting AI applications or building solutions internally. Notably, organizations are also focusing on reshoring production and adapting to trade policies. About 18% of manufacturers are exploring shifting operations back to the U.S. within the next six months, aiming to reduce risks from tariffs and boost domestic resilience. Surveyed executives engage a range of strategies, from changing product mixes to absorbing cost increases through margin adjustments, reflecting their adaptability in the face of global uncertainties.
In conclusion, the Institute for Supply Management’s 2026 outlook projects a year of solid growth and adaptation for U.S. manufacturing and services sectors. With rising revenues, targeted investments, and increasing AI integration, businesses remain optimistic yet vigilant. As companies invest in supply chain resilience and navigate global challenges, ISM’s forecast offers a detailed roadmap for the industry’s year ahead.
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