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
Cautious Optimism Amid Persistent Uncertainty
CEO confidence remains stable, but operating discipline is increasing. Inflation, labor constraints, and geopolitical uncertainty are driving more cautious hiring and investment decisions, even as most leaders still expect revenue and profit growth. The focus continues shifting toward productivity, automation, operational efficiency, and projects with clear ROI. For system integrators, the environment increasingly favors firms that can deliver measurable business outcomes, predictable execution, and operational resilience.
- Confidence: Index increased 2% to 5.5/10, returning to January levels.
- Outlook: 12-month sentiment remains ~10% stronger than views of current conditions.
- Business Conditions: 52% expect improvement; 22% expect worsening conditions.
- Economic Expectations: 47% expect U.S. growth; 25% expect recession or slowdown.
- Inflation: CPI expectations increased to 4.6% average and 3.3% median.
- Corporate Plans: 74% expect revenue growth; 63% expect profit growth; ~50% plan higher capital spending.
- Hiring: 44% plan to increase headcount, down from 52%.
- Key Risks: Rising costs and Middle East instability remain major concerns heading into 2026.
Manufacturing Growth Holds as Inflation Rises
U.S. manufacturing expanded for a fourth straight month in April (PMI 52.7%). Demand remained healthy, but hiring stayed cautious while input costs surged to their highest level since April 2022. Overall, manufacturing activity continues expanding, though rising inflation, labor constraints, and supply chain friction are increasing execution pressure.
- Manufacturing Expansion: PMI held at 52.7%, marking 18 straight months of broader economic expansion.
- Demand: New Orders increased to 54.1%, with customer inventories still considered “too low.”
- Production: Output remained in expansion at 53.4%, though growth moderated from March levels.
- Inflation: The Prices Index surged to 84.6%, driven by metals, energy, tariffs, and logistics costs.
- Hiring: Employment fell to 46.4%, reflecting continued labor caution despite ongoing demand.
- Supply Chains: Supplier deliveries slowed further, while backlogs remained in expansion territory.
OUR KEY TAKEAWAYS
Confidence steady, but investment discipline. CEO and PMI indices signaling economic expansion, but companies are more selective in hiring and capital spending decisions. Productivity, operational efficiency, and measurable ROI remain key priorities.
Demand remains healthy, but growth is uneven. Manufacturing new orders and services remained in expansion territory. Demand is strongest in infrastructure, energy, data centers, electrification, and modernization-related markets, while broader conditions remain mixed.
Cost pressure remains a major concern. Manufacturing and Services PMI reflect elevated pricing pressure tied to fuel, metals, transportation, software licensing, and supply chain, causing increasing scrutiny around project timing, payback periods, and execution risk.
Labor constraints continue supporting automation investment. Employment indexes in manufacturing and services reinforcing continued labor tightness, causing focus on productivity and operational efficiency through automation and digitalization rather than workforce expansion.
Projects moving forward—but approvals taking longer. Production, business activity, and backlog data suggest work continues moving through the economy, though customers are applying greater financial and operational scrutiny before approving projects.
The outlook remains cautiously constructive. Indicators pointing toward steady, though uneven, economic expansion. Despite ongoing inflation and geopolitical concerns, industrial activity and automation investment remain relatively resilient.
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 – CSIA ROC Analysis
Exotek Insights – UNXANO ROC Analysis
OUR KEY TAKEAWAYS
Broader industrial demand continues improving. UNXANO is trending positively on both short-term and long-term rate-of-change measures, reinforcing that industrial capital investment activity remains in expansion territory, suggesting continued stabilization entering mid-2026.
Industrial momentum is improving gradually. The 3/12 ROC trend has steadily strengthened and is now firmly positive, while the 12/12 ROC has moderately improved. The industrial economy is moving forward at a measured pace rather broad acceleration.
SI revenue trends align with improving industrial conditions. SI revenue is more volatile due to project timing, backlog conversion, resource constraints, customer mix, and sector exposure. But, CSIA revenue is directionally consistent with strengthening UNXANO trends.
The overall signal remains cautiously constructive. UNXANO and CSIA support a narrative of steady, though uneven, industrial expansion. Momentum is improving gradually, remaining sensitive to inflation, geopolitical uncertainty, supply chain variability, and execution risk.
CSIA STATS ANALYSIS
OUR KEY TAKEAWAYS
Revenue improving YOY. Through March, revenue distribution data showed improvement across median and upper-quartile firms versus 2025, though performance variability across firms and sectors remains elevated. The recovery appears real, but still uneven across the SI market.
Utilization improving, but most have excess capacity. April data showed 36% of firms reporting “no capacity,” up significantly from 19% a year earlier, indicating stronger utilization. However, most firms still report available capacity, reinforcing that demand remains active but unevenly distributed.
Outlook sentiment remains strongly positive. A striking 94% of firms reported a positive outlook, significantly above prior-year levels, suggesting most integrators remain optimistic about future demand and business conditions despite growing uncertainty.
The primary challenge remains execution consistency. Many firms are positioned for growth but continue facing challenges around resource alignment, project timing, backlog conversion, and operational consistency. Firms capable of maintaining disciplined execution and utilization management appear best positioned moving forward.