Economic Insights

Manufacturing CEOs Remain Confident, but Growth Becomes More Disciplined

Manufacturing CEO confidence continued to improve in July, reaching its highest level of 2026 as executives reported stronger current business conditions and continued optimism for revenue and profit growth. At the same time, CEOs are becoming more selective about hiring and capital investments, reflecting a disciplined approach to growth amid ongoing policy uncertainty, tariffs, inflation, and geopolitical risks.

• Current Conditions: Improved to 5.8/10, marking the highest confidence level of 2026 and the fourth consecutive monthly increase.
• Outlook: CEOs remain optimistic, although expectations for business conditions over the next 12 months moderated from June’s elevated levels.
• Business Conditions: 37% expect U.S. business conditions to improve over the next year, while 38% expect conditions to remain stable.
• Revenue Outlook: 73% expect revenue to increase during 2026, essentially unchanged from June.
• Profit Outlook: 65% expect profits to increase during 2026, remaining well above historical averages.
• Capital Investment: 39% of manufacturing CEOs plan to increase capital expenditures over the next 12 months, down from 46% in June, indicating that while investment remains healthy, executives are becoming more selective in approving new capital projects.
• Hiring Outlook: 43% plan to increase hiring, down from 48% in June, reflecting a more measured approach to workforce expansion.
• Key Risks: Tariffs, inflation, policy uncertainty, labor availability, and geopolitical instability continue to influence executive decision-making.

Manufacturing Expansion Accelerates as Demand Reaches a Four-Year High

U.S. manufacturing gained significant momentum in July, with the ISM Manufacturing PMI climbing to its highest level in more than four years. Strong gains in new orders, production, and order backlogs indicate manufacturers continue to invest in increasing capacity despite ongoing cost pressures. For system integrators, the combination of robust demand, expanding production, and modest hiring suggests continued opportunities to help manufacturers automate, optimize, and scale their operations.

• Manufacturing PMI: Increased to 55.6%, up from 53.3% in June, marking the strongest manufacturing expansion in more than four years.
• New Orders: Rose to 57.1%, indicating customer demand continues to strengthen.
• Production: Increased sharply to 59.3%, reflecting manufacturers’ efforts to expand output to meet growing demand.
• Order Backlogs: Returned to expansion at 52.0%, suggesting incoming orders are beginning to outpace production capacity.
• Employment: Improved to 50.2%, returning to modest expansion. While manufacturers are adding workers, the pace of hiring remains measured, increasing the increasing reliance on system integrators and automation partners to help meet production goals.
• Prices: Remained elevated at 68.9%, yet manufacturers continue to increase production despite persistent input cost pressures—an indication that the need to expand capacity outweighs concerns over higher costs.
• Services PMI: The Services PMI also remained in expansion territory at 54.1%, supporting continued demand for maintenance, field services, and other recurring service offerings provided by many system integrators.
• Industry Breadth: 14 of 18 manufacturing industries reported growth, demonstrating broad-based expansion across the sector.

OUR KEY TAKEAWAYS

Industrial demand continues to strengthen. Manufacturing CEO confidence reached its highest level of 2026, while the ISM Manufacturing PMI climbed to its strongest reading in more than four years. Combined with continued expansion in the services sector, these indicators continue to support investment in industrial automation and related services.

Customers remain optimistic, but more disciplined. Manufacturing CEOs continue to forecast higher revenues and profits, yet fewer plan to increase capital spending and hiring than last month. Investment remains healthy, but projects are likely to face greater scrutiny and require a stronger business case.

Manufacturers are prioritizing production over cost. New orders, production, and order backlogs all strengthened in July despite continued input cost pressures. Manufacturers appear focused on increasing capacity to meet demand, creating continued opportunities for system integrators that help improve productivity and throughput.

Measured hiring continues to support automation. Manufacturing employment returned to modest expansion but continues to lag production growth. As manufacturers work to increase output with limited workforce expansion, demand for automation and system integration services should remain favorable.

The outlook remains constructive. Strong manufacturing activity, healthy customer demand, and continued expansion in the services sector provide a positive backdrop for system integrators. While tariffs, inflation, and geopolitical uncertainty continue to warrant caution, the overall environment remains supportive of growth through the balance of 2026.