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.
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Hope that the approaching July trade deadline will bring clarity for U.S. business and further strengthen the economy
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Only 28% fear near-term recession (down from 62% in April)
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Revenue = 67% (+14)
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Profits = 54% (+9)
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CapEx = 36% (+9)
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New Orders and Backlogs Contracting
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Production and Employment Contracting
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Supplier Deliveries Slowing
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Raw Materials Inventories Contracting
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Customers’ Inventories Too Low
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Prices Increasing
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Exports and Imports Contracting
PMI
Demand indicators were mixed: New Orders and Backlog of Orders contracted more slowly, while Customers’ Inventories and New Export Orders showed stronger contraction. A low Customers’ Inventories Index is typically positive for future production.
Factory output remained weak despite an increase in the Production Index, showing continued economic uncertainty. The Employment Index contracted but not as fast as April, with layoffs preferred over attrition.
Regarding inputs, the Inventories Index shifted to contraction as companies completed pre-tariff stockpiling. Supplier Deliveries remained slow, reflecting delays at ports. Tariff-driven price increases eased slightly, but Imports fell sharply, dropping 7.2 percentage points from April.
CEO – May
After a season of deep tariff and trade uncertainty, America’s CEOs are betting the volatility will be short-lived and that by fall businesses—and the U.S. economy—will have a clearer path ahead.
A growing proportion of CEOs are now forecasting growth by the end of the year: 36 percent say it will be “mild growth” and 6 percent expect “strong growth”.
Despite improving forecasts, CEOs say rising operating costs overall are weighing on their ability to further expand margins. More than two-thirds (69 percent) expect costs to continue to rise in the year ahead. This could create opportunities for SIs focused on helping with operating cost reduction.
The CAPEX spending forecast has improved with 36 percent planning to increase capex vs. 27 percent in May, 56 percent in January.
Exotek Insights – CSIA vs UNXANO Analysis
We have transitioned from tracking US Capital Goods New Orders (USCGNO) to Non-Defense Capital Goods Excluding Aircraft (UNXANO). This shift better aligns with the focus of most system integrators and provides a clearer indication of actual capital spending.
Exotek Insights – UNXANO ROC Analysis
Exotek Insights – CSIA ROC Analysis
Our Key Takeaways
ROC Analysis
The UNXANO has remained stagnant since late summer 2023 after it began slowing in January 2021. On a positive note, spending remains at a high level. However, recent announcements have added to the uncertainty, making an uptick unlikely in the near future.
System integrators faced a significant slowdown last year, even entering the contraction zone. The second half showed promise with the 3/12 crossing above the 12/12, but the year ended with the 3/12 crossing back down over the 12/12 significantly. The first quarter of this year has turned out to be a positive one with growth being signaled going forward. With all the uncertainty in the market most integrators or very concerned about Q3 and Q4. The revenue in the first four months was primarily driven by eating through backlog. The ROC analysis for CSIA members is somewhat distorted due to the high revenue month in December, when end users typically spend the remainder of their approved budgets.
Our Key Takeaways
After a sluggish start to the year, our SI community has picked up steam. Larger, mid-sized, and smaller SIs are all enjoying increasing revenue compared to last year. But with the uncertainty of tariff impacts to manufacturing, we’ll keep a close eye on the progress of these new projects.
Early 2025 saw a build-up in workload intensity, peaking in March when half the respondents felt swamped. However, April and May are now indicating substantial underutilization. Correspondingly, there has been a growing negative sentiment in our community’s outlook in stark contrast to previous years of optimism.
Our Key Takeaways
The last three years have been increasingly difficult for professional services firms, with revenue and utilization trending downward. Interestingly, firms that focus on improving their maturity level to institutionalized or optimized tend to perform better across almost every measure. This highlights the importance of implementing CSIA Best Practices.