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 Confidence Rises in December
After an incredibly volatile year for the sector, U.S. manufacturers close 2025 with yet another uptick in business confidence––on the back of healthy improvements in both October and November.
Confidence has risen for the third month in a row, and manufacturing CEOs say they are optimistic about what is to come in 2026.
- CEOs now rate future business conditions at 6.3 / 10, marking another month of upward momentum.
- 73 % of manufacturers expect to increase their profits in the year ahead, up 25 % since last month.
- 78 % expect to increase their revenues, up 16 % since last month.
- 43 % expect to deploy more capital next year, down 4 % since November.
- 43 % expect to add to their headcount over the next year, down 8 % since last month.
Manufacturing Sector Economic Activity Contracts for the 10th Consecutive Month
Economic activity in the manufacturing sector contracted in December for the 10th consecutive month, following a two-month expansion preceded by 26 straight months of contraction.
Key Index Readings:
- Overall index was 47.9 down even further from November by .3%
- The Production index remains in growth territory at 51.0 but slowed from November by .4%
- Employment continues its 11-month contraction at 44.9 but is better than November by .9%
OUR KEY TAKEAWAYS
CEO and PMI Indices
- Selective investment continues — optimism has not yet unlocked spending. Manufacturing CEO confidence strengthened again in December, but PMI data confirms that real activity ended 2025 in contraction. Integrators should continue to expect measured, selective project approvals, with an emphasis on incremental scopes rather than broad expansion programs. Early-stage planning is increasing, but execution remains cautious.
- Productivity and reliability remain the primary value drivers. With New Orders and Employment still contracting, manufacturers are focused on doing more with existing assets, protecting margins, and stabilizing operations. Projects centered on reliability, throughput improvement, labor substitution, and modernization with clear payback will continue to move ahead of capacity-expansion efforts.
- Planning conversations are accelerating, even if projects lag. Rising CEO confidence suggests manufacturers are increasingly willing to engage in budget discussions, feasibility work, and phased planning for 2026. Integrators who insert themselves early — helping shape scope, timing, and ROI — will be better positioned when projects convert from intent to authorization.
- Labor constraints remain a structural tailwind for SIs. Despite improving sentiment, manufacturing employment remains in contraction. Manufacturers are still reluctant to add headcount, reinforcing demand for external engineering capacity, managed services, and flexible delivery models that allow progress without long-term staffing commitments.
- Expect a gradual, uneven recovery — not a clean inflection. CEO optimism continues to lead hard data, but the gap between sentiment and activity remains wide. This points to a slow, uneven recovery path, with momentum likely building through mid-to-late 2026 rather than a sharp early-year turn. Integrators that maintain discipline, stay close to clients, and execute reliably will capture early gains as confidence begins to translate into spending.
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
The UNXANO index is showing early signs of returning to growth territory—a positive signal for capital spending and automation demand.
- Capital Spending Recovery: Both the 3/12 and 12/12 rates of change have moved into positive territory, indicating renewed momentum in new orders.
- Short-term Strength: The 3/12 line remains above the 12/12 line, suggesting near-term growth is outpacing the longer-term trend—a bullish indicator.
- Implications for SIs: As capital spending expands, automation projects are likely to follow. For now, end users continue to seek multiple bids and apply price pressure. Watch for a shift when urgency to secure capacity outweighs price sensitivity—this will mark a stronger demand cycle.
Together, these signals point to a cautiously optimistic outlook for system integrators as the market transitions toward growth.
The CSIA ROC indicates that the industry would benefit from more capital goods orders flowing into automation-related spending. The 3/12 is clearly exerting downward pressure on the 12/12, with no signs of improvement evident. We will continue to monitor closely, as things could shift rapidly.
CSIA STATS ANALYSIS
OUR KEY TAKEAWAYS
SI Performance Weakens at Year-End, Even as Optimism Holds
The latest CSIA EZ Stats show that SI performance softened late in the year, while confidence about the future remains elevated. Revenue pulled back in November, utilization fell to historically low levels in December, and optimism remains strong highlighting a growing disconnect between current execution and future expectations.
- REVENUE: October’s surge faded; November performance disappointed. Revenue through November shows that October’s top-quartile spike did not carry forward. Top-quartile results fell back toward 2024 levels, while median and bottom-quartile firms declined further, reinforcing that recent strength was episodic rather than sustained. Unless December comes in materially stronger, the SI community is likely to close the year on a softer note than anticipated.
- CAPACITY: Utilization is historically weak, signaling a demand shortfall. December capacity readings show only ~12% of SIs reporting “good” utilization, one of the lowest readings observed historically. This indicates widespread under-utilization, not delivery constraint. The data suggests that firms are carrying excess capacity due to insufficient executable work, aligning closely with PMI contraction and delayed end-user spending.
- OUTLOOK: Confidence remains elevated despite weak execution. Despite soft revenue and historically low utilization, SI outlook remains strongly positive. This optimism likely reflects pipeline activity, quoting momentum, and active planning conversations rather than current workload. Integrators appear confident that deferred projects remain viable and that demand will improve in 2026—even if execution lags today.
Our Takeaways
- October was not an inflection point. The October revenue spike now appears timing-driven rather than structural. November results reinforce that a broad recovery has not yet taken hold.
- The market is demand-constrained, not capacity-constrained. Historically low utilization points to delayed project releases and cautious end-user spending—not labor shortages—as the primary limiter of SI performance.
- Optimism is being driven by pipeline, not revenue. Elevated outlook readings suggest integrators believe demand is forming beneath the surface. Historically, this optimism precedes recovery—but often with a multi-quarter lag.
- Execution discipline matters more than scaling. With utilization low and revenue uneven, the near-term priority is converting pipeline into executable work, managing scope tightly, and protecting margins.
- Positioning as a trusted partner remains critical. Even amid under-utilization, clients continue to face labor challenges, reliability risk, and aging infrastructure. Integrators that position around modernization, optimization, and operational resilience will be best positioned as spending decisions unlock.
Summary Insight – The CSIA data points to optimism without utilization.
Revenue weakened late in the year, utilization is historically low, and confidence remains high, suggesting the SI community is in a holding pattern where expectations are rising faster than execution. The challenge heading into 2026 will be turning pipeline optimism into signed, deliverable work.