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Economic Outlook for 2026

The Institute for Supply Management (ISM) has published its forecast indicating that the economic momentum in the United States is poised for a notable upturn in 2026. This optimistic projection is backed by insights from purchasing and supply management executives across various sectors, who highlight anticipated revenue growth across manufacturing and service industries.

Key Predictions

According to the December ISM Supply Chain Planning Forecast, revenues are projected to rise in 16 of the 18 manufacturing sectors as well as 16 out of 18 service sectors. Specifically, manufacturing revenue is expected to grow by an impressive 4.4% compared to the 2.5% increase observed in 2025. Factors contributing to this optimism include expected increases in capital expenditures—3% for the manufacturing sector and 2.5% for services.

Currently, manufacturing sector operations sit at a capacity utilization rate of 82.4%, while service providers are operating even more efficiently at 90.2%. These figures mark a notable enhancement from the previous year, indicating robust economic activity.

Manufacturing Sector Insights

Manufacturing executives have expressed confidence, with 56% anticipating higher revenues in 2026 than in 2025. Growth is particularly expected in the Food, Beverage, Tobacco Products, and Fabricated Metal Products sectors, with most industries forecasting revenue improvements. This upbeat sentiment comes after manufacturers experienced a contraction for nine consecutive months ending in November.

Manufacturing professionals foresee growth in employment numbers—predicted to increase by 0.4 percentage points in 2026. Furthermore, the prices for raw materials are expected to rise, projecting a 5.4% increase in prices during the first five months of 2026. These trends underline the pressing need for businesses to strategically manage their supply chains and pricing strategies.

Service Sector Growth

On the service side, 54% of executives forecast an increase in their revenues in 2026. They predict an overall revenue bolstering of 4.6%, slightly up from a 4.2% increase in 2025. Leading industries, such as Real Estate, Rental & Leasing, and Professional, Scientific, and Technical Services, are expected to drive this growth.

However, service sector executives are aware of the challenges ahead, anticipating a slight decrease in growth momentum in the latter half of 2026. Even so, they predict an increase in overall employment levels by 2.5% in the service sector, reinforcing positive sentiment.

Factors Influencing Economic Conditions

The ISM also highlighted important factors affecting both sectors. Respondents pointed to inflationary pressures on raw materials, which they expect to sustain throughout the year. Cost management strategies are essential as the labor costs are also anticipated to rise—expected to increase by 4.8% in manufacturing and 3.2% in services.

Both sectors will likely maintain their capital expenditure momentum, indicating a commitment to growth and investment in the coming year. The anticipated strengthening of the U.S. dollar is expected to have a favorable impact on exports, although import levels are projected to remain stable.

Conclusion

The optimistic forecasts from ISM suggest that 2026 may be a transformative year for the US economy. The manufacturing and service sectors are ready to capitalize on growth opportunities, solidifying confidence among purchasing executives. Continuous monitoring of economic conditions and strategic adaptations will be crucial as they navigate potential challenges in achieving their revenue and growth targets. Through careful planning and proactive management, businesses can thrive amid these changes, setting a strong foundation for future prosperity.

In summary, the ISM's insights provide a promising outlook, with clear indications of growth and opportunity that could drive the US economy forward in 2026.