Economic Insights
This collection of the latest updates and data from the systems integration industry explores leading indicators including the CEO Confidence Index, Purchasing Managers Index, and CSIA updates. We offer our own insights based on the information referenced and interactions with Exotek clients and the SI community.
CEO Confidence Index and PMI
Manufacturing CEO Confidence Strengthens Again in March
Manufacturing CEO sentiment improved again in March despite rising global volatility, with leaders reporting better current conditions and the strongest forward-looking outlook of the year so far. The survey suggests manufacturers remain more resilient than other sectors, though sentiment is increasingly split between firms seeing solid order activity and those worried about policy, trade, and geopolitical disruption.
- Manufacturing CEOs rate current business conditions at 5.7 / 10, up nearly 4 percent from February.
- They expect future business conditions to improve to 6.2 / 10 over the next 12 months, the most optimistic manufacturing outlook so far in 2026.
- 81% expect revenues to increase this year, down from 90% in February.
- 74% expect profits to increase, also down from February’s stronger reading.
- 52% plan to increase capital investment, slightly below February.
- 57% plan to add headcount, a notable increase from February.
- 67% expect economic growth in the next six months, while the share expecting recession rose from 6% to 11%.
Despite softer revenue, profit, and capex expectations versus February, March’s survey shows manufacturers still leaning positive overall, supported by healthy order books, backlog, and a belief that current volatility can be worked through or resolved by year-end.
Manufacturing Activity Expands Again in March, but Momentum Shows Mixed Signals
U.S. manufacturing activity continued to expand in March, marking a third consecutive month of growth following a prolonged contraction period. While overall activity strengthened modestly, underlying indicators point to a more mixed environment, with solid production gains offset by softer demand signals and rising cost pressures.
- Manufacturing PMI registered 52.7, up slightly from 52.4 in February and the strongest level since mid-2022.
- New Orders Index came in at 53.5, expanding for a third month but declining from February, indicating some moderation in demand.
- Production Index rose to 55.1, showing stronger output as firms work through backlog and current demand.
- Employment remained in contraction, reflecting continued caution in hiring despite improved activity levels.
- Supplier deliveries slowed further, signaling ongoing supply chain friction and logistics challenges.
- Prices Index surged to 78.3, the highest since mid-2022, highlighting renewed inflation pressure in materials and inputs.
Overall, March data reinforces that manufacturing has moved back into expansion territory, but the recovery remains uneven. Production strength and continued order growth are encouraging, yet slowing new orders, persistent labor constraints, and sharply rising input costs suggest that momentum could be pressured in the months ahead.
OUR KEY TAKEAWAYS
Confidence is holding—but conviction is less uniform.
Manufacturing CEO sentiment improved again in March, with stronger views on current and future conditions. However, expectations for revenue, profit, and capital investment pulled back from February’s highs. PMI data reinforces this mixed picture: manufacturing remains in expansion for a third straight month, but new orders softened while cost pressures increased. The signal is continued forward movement—but with less broad-based conviction.
Growth is real—but increasingly selective and pressured.
Manufacturers are still planning to grow, but the bar for investment is rising. Elevated input costs and ongoing policy/geopolitical uncertainty are reinforcing disciplined decision-making. Projects are moving forward—but more selectively, with tighter scrutiny on timing, scope, and financial return.
Capacity and labor constraints continue to drive behavior.
A majority of manufacturers report operating at or near capacity, while employment remains constrained. This continues to prioritize projects focused on throughput, reliability, and labor productivity over large-scale expansion.
Execution demand is increasing—even as approvals take longer.
PMI production strength and improving CEO views of current conditions suggest work is getting done, even as new order momentum moderates. Execution demand remains active, but approvals are more gated—leading to longer sales cycles and more checkpoints.
The expansion path remains steady—but uneven.
The data points to continued economic expansion, but with more variability across sectors and companies. Strength in production and backlog is offset by softer demand signals and rising cost pressure. The environment favors firms that can manage variability—balancing pipeline development, disciplined execution, and cost control.
Geopolitical risk bears watching—but has not yet altered the trajectory.
Recent escalation in the Iranian conflict introduces potential risks around energy prices and global shipping. These impacts are not yet reflected in the data, which still points to steady, if uneven, expansion. However, sustained disruption could increase cost pressure and delay project timing. For now, the data shows resilience, but the risk profile has increased.
Non-Defense Capital Goods Excluding Aircraft (UNXANO) ROC Analysis
We have transitioned from tracking US Capital Goods New Orders (USCGNO) to UNXANO which provides a clearer indication of actual capital spending and better aligns with the focus of most system integrators.
Exotek Insights – CSIA vs UNXANO Analysis
Exotek Insights – UNXANO ROC Analysis
Exotek Insights – CSIA ROC Analysis
OUR KEY TAKEAWAYS
Leading indicators confirm early-stage expansion is taking hold.
The UNXANO data continues to strengthen, with both short-term (3–12) and longer-term (12–12) rates of change remaining positive and improving since late 2025. This marks
a clear transition from stabilization into early-cycle expansion. Importantly, the signal is becoming more consistent rather than episodic, suggesting underlying demand is firming rather than simply rebounding from a low base.
Momentum is building—but still measured.
While the direction is clearly positive, the slope of growth remains moderate rather than accelerating sharply. This aligns with broader economic signals: activity is improving but not surging.
The environment supports continued growth in automation demand, though likely at a steady, disciplined pace rather than through a rapid upswing.
SI performance should improve as lag effects materialize.
The strengthening UNXANO signal is now beginning to align with improving CSIA revenue trends, consistent with the historical lag between capital goods demand and SI activity.
If sustained, this points toward improving backlog conversion and revenue performance for integrators through 2026.
CSIA STATS ANALYSIS
OUR KEY TAKEAWAYS
Revenue trends show early improvement—but not enough to absorb capacity.
Through February, revenue distribution data shows modest year-over-year improvement, with gains across median and upper quartile firms.
However, performance remains uneven across the market, and current revenue levels are not yet sufficient to fully utilize available capacity across SI businesses. The recovery is real—but still early and inconsistent.
Capacity remains available—with utilization stabilizing at a lower level.
March data shows 31% of firms reporting positive capacity (i.e., satisfied with utilization), up from February and in line with several periods over the past year, but still below ~50% levels seen a year ago.
This indicates that utilization has recovered modestly from a recent low but remains structurally below prior levels. The SI market is not capacity-constrained—rather, firms continue to experience uneven demand flow and difficulty maintaining consistent utilization.
Outlook is strongly positive—despite current operating friction.
A striking 94% of firms report a positive outlook, up significantly from ~62% last year. This reflects strong confidence in future demand and business conditions, even as current utilization remains below desired levels.
The disconnect between past performance, current utilization, and future expectations persists.
The opportunity remains internal—not demand-driven.
The data suggests that most SIs are positioned for growth but are not yet operating at full effectiveness.
Firms that can better align sales, resource planning, and project execution will be best positioned to convert improving demand into consistent utilization and profitability.