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 Rebounds in February
After softening at the start of the year, manufacturing CEO sentiment improved in February as expectations for revenues, profits, and capital investment strengthened. While leaders remain cautious about the broader economic environment, forward-looking operating expectations moved noticeably higher.
- Manufacturing CEOs rate future business conditions at 6.1 / 10, a slight improvement from January’s reading.
- 90% expect to increase revenues in the year ahead, up significantly from 77% the prior month.
- 79% expect profits to increase, the highest share forecasting profit growth since early 2025.
- 56% expect to increase capital investment, a notable jump from 43% in January.
- 49% expect to add headcount, essentially unchanged month to month.
Despite continued concerns around policy uncertainty, tariffs, and cost pressures, February’s survey shows operational confidence strengthening across key indicators, suggesting manufacturers remain positioned for growth rather than retrenchment.
Manufacturing Expansion Continues, Services Activity Strengthens
The U.S. supply managers report continued economic expansion early in 2026. Manufacturing activity remained in expansion territory for a second consecutive month in February after breaking a year-long contraction streak in January. At the same time, the services sector accelerated, reflecting strong demand across the broader economy.
Manufacturing PMI – February 2026
- The manufacturing PMI registered 52.4%, marking the second consecutive month of expansion after January’s 52.6% reading.
- New orders remained positive, signaling continued demand following the sector’s return to growth earlier in the year.
- Production activity remained solid, though manufacturing employment continued to contract, indicating cautious hiring even as output improves.
Services PMI – February 2026
- The services PMI registered 56.1%, its strongest reading in more than three years, signaling accelerating growth in the dominant sector of the U.S. economy.
- New orders, business activity, and employment all strengthened, pointing to continued momentum in services demand.
Together, these readings suggest the broader economy continues to expand, with manufacturing stabilizing after a prolonged downturn while services activity remains a primary driver of growth.
OUR KEY TAKEAWAYS
Operating expectations improved, though caution remains. Manufacturing CEO confidence strengthened in February, with significantly more leaders expecting revenue growth, profit improvement, and increased capital investment in the year ahead. PMI data reinforces the improving tone: manufacturing activity has now expanded for two consecutive months, while services growth accelerated. The signal is not a surge in activity, but a modest strengthening of operating expectations after a prolonged manufacturing slowdown.
Investment is moving forward — but scrutiny remains high. A growing share of manufacturers expect to increase capital spending, yet PMI sub-indices suggest companies continue to move deliberately. Projects are often phased and carefully scoped, with leadership teams emphasizing ROI clarity and operational impact before committing to larger initiatives.
Productivity and reliability projects remain the priority. Manufacturing employment remains constrained, keeping pressure on companies to maximize existing assets. Projects tied to reliability, throughput improvement, labor substitution, and modernization with clear payback continue to outrank pure capacity-expansion investments.
Planning activity is increasing ahead of execution. Improving PMI activity and stronger revenue expectations suggest more planning, budgeting, and feasibility work underway for 2026 initiatives. Integrators that engage early to help shape scope, timing, and ROI will be best positioned as these plans convert into funded projects.
Expansion is likely to remain gradual and uneven. Taken together, current sentiment and activity indicators point toward continued economic expansion in 2026, though likely at a measured pace rather than through a sharp inflection. Recent geopolitical developments — including the outbreak of conflict with Iran and resulting volatility in global energy markets — introduce additional uncertainty that could influence inflation and operating costs if sustained. For now, however, economic indicators continue to point toward cautious growth rather than contraction.
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 has firmly entered growth territory, although just above the contraction line, signaling improvements in capital spending and automation demand.
- Capital Spending Recovery: Both 3/12 and 12/12 rates of change remained positive in 2025, reflecting renewed momentum in new orders.
- Short-Term Strength: Short-term growth (3/12) is outpacing the longer-term trend (12/12), which suggests a bullish outlook.
- Implications for SIs: Rising capital spending is driving more automation projects, despite ongoing price competition. End users still pursue multiple bids and push for lower prices, but demand will increase when capacity becomes urgent and price sensitivity lessens.
The CSIA ROC implies the SI industry would benefit from more capital goods orders in automation-related spending. With upward pressure from the 3/12, current indications suggest a steady progression throughout 2026.
In summary, system integrators can anticipate slow, but positive movement as market conditions improve. We will continue to monitor developments.
CSIA STATS ANALYSIS
OUR KEY TAKEAWAYS
Revenue closed 2025 stronger than it began — and early 2026 activity remains solid.
December 2025 revenue rebounded across the bottom, median, and top revenue quartiles to at or above December 2024 levels, reflecting year-end project completion and revenue recognition. More importantly, early 2026 data shows a strong start across the SI community, with January revenues exceeding January 2025 levels across all quartiles. While monthly results can be volatile, the early-year comparison suggests demand and project activity remain healthy as firms enter 2026.
Utilization remains uneven across the SI community.
In the latest CSIA snapshot, roughly 85% of firms report having available capacity, while only about 15% report being fully loaded. This indicates that uneven project timing and delayed approvals continue to influence utilization more than staffing constraints.
Outlook remains strongly positive.
Approximately 86% of firms report a positive outlook, indicating continued confidence in future demand even as utilization and project timing remain uneven.
Net signal: uneven demand and execution timing.
SIs continue to see opportunity, but not always at the right pace or mix to keep teams fully utilized. Many firms remain focused on smoothing backlog, tightening project selection, and improving conversion from planning to execution. And, again, geopolitical developments — including the outbreak of conflict involving Iran — introduce additional uncertainty into energy markets. While it is too early for these developments to appear in economic indicators, sustained energy price increases could influence manufacturing costs and capital spending in the months ahead.