ISM REPORTS ECONOMIC ACTIVITY TO BE FLAT THROUGH 2025

Manufacturing Expected to be Flat or Slightly Expand in 2025; Revenue to Increase 0.1%; Capital Expenditures to Decrease 1.3%; Capacity Utilization at 79.2%; Services is Expected to be Flat in 2025; Revenue to be Flat (No Change from 2024); Capital Expenditures to Decrease 3.3%; Capacity Utilization at 86.5%

, /PRNewswire/ -- The U.S. economy will be mostly flat for the rest of 2025, say the nation's purchasing and supply executives in the Spring 2025 ISM Supply Chain Planning Forecast (formerly known as the Spring ISM Semiannual Economic Forecast). Expectations for the remainder of 2025 are lower than those expressed in December 2024. Trade issues, continued inflation concerns, and geopolitical uncertainty are all headwinds for the rest of the year.

These projections are part of the forecast issued by Institute for Supply Management^® (ISM^®) Business Survey panelists. The forecast was presented today by Timothy R. Fiore, CPSM, C.P.M., Chair of the ISM Manufacturing Business Survey Committee, and Steve Miller, CPSM, CSCP, Chair of the ISM^® Services Business Survey Committee.

Manufacturing Summary
Revenue for 2025 is expected to increase, on average, by 0.1 percent. This is 4.1 percentage points lower than the December 2024 forecast of 4.2 percent, and 0.7 percentage point lower than the 0.8-percentage point year-over-year increase reported for 2024. Thirty-four percent of respondents say that revenues for 2025 will increase, on average, 9.7 percent compared to 2024. Twenty-two percent say revenues will decrease (14.1 percent, on average), and 44 percent indicate no change. With an operating rate of 79.2 percent, a projected 1.3-percent decrease in capital expenditures, a 7.5-percent increase in prices paid for raw materials, and a slight (0.1 percent) decrease in employment expected by the end of 2025, the manufacturing sector will, at best, grow very slightly. "With eight manufacturing industries expecting revenue growth in 2025 and eight industries expecting employment growth in 2025, panelists forecast a flat rest of the year. Sentiment in each industry was generally consistent with performance reports in the April 2025 Manufacturing ISM^® Report On Business^®, as well as the fall ISM Supply Chain Planning Forecast conducted in December," says Fiore.

The eight of 18 industries that report projected revenue increases for the rest of 2025, listed in order — are: Primary Metals; Miscellaneous Manufacturing; Computer & Electronic Products; Chemical Products; Electrical Equipment, Appliances & Components; Printing & Related Support Activities; Food, Beverage & Tobacco Products; and Transportation Equipment.

Services Summary
Respondents expect no change in overall revenues in 2025, which is 3.9 percentage points lower than the 3.9-percent increase forecast in December 2024. Thirty-three percent of respondents say that revenues for 2025 will increase, on average, 9 percent compared to 2024. Meanwhile, 18 percent expect their revenues to decrease (16.6 percent, on average), and 49 percent indicate no change. "The services sector will be flat for the rest of 2025. Services companies are currently operating at 86.5 percent of normal capacity. Supply managers indicate that prices are expected to increase 7.3 percent over the year, reflecting increasing inflation. Employment is projected to decrease 1.6 percent. Nine industries forecast increased revenues, down from the 17 industries that predicted increases in December 2024," says Miller.

Nine of 18 services industries project revenue increases in 2025, listed in order: Accommodation & Food Services; Arts, Entertainment & Recreation; Finance & Insurance; Information; Wholesale Trade; Transportation & Warehousing; Health Care & Social Assistance; Professional, Scientific & Technical Services; and Utilities.

OPERATING RATE

Manufacturing
Purchasing and supply executives report that their companies are operating, on average, at 79.2 percent of normal capacity, 3.1 percentage points lower than the figure reported in December 2024. The 10 industries reporting operating capacity levels above the average rate of 79.2 percent — listed in order — are: Petroleum & Coal Products; Apparel, Leather & Allied Products; Paper Products; Printing & Related Support Activities; Miscellaneous Manufacturing; Food. Beverage & Tobacco Products; Wood Products; Chemical Products; Transportation Equipment; and Computer & Electronic Products.

Services
Organizations are operating, on average, at 86.5 percent of normal capacity, according to Business Survey panelists. This is 0.9 percentage point lower compared to December 2024. The nine industries operating at capacity levels above the average rate of 86.5 percent — listed in order — are: Retail Trade; Utilities; Educational Services; Other Services; Finance & Insurance; Information; Mining; Construction; and Real Estate, Rental & Leasing.

PRODUCTION CAPACITY

Manufacturing
Production capacity is expected to increase 1.8 percent in 2025. In December, panelists reported an increase of 1.7 percentage points for 2024 and projected an increase of 4 percent this year. Twenty-seven percent of respondents expect capacity increases of, on average, 15.6 percent; 17 percent expect decreases of, on average, 14.6 percent; and 56 percent expect no change. The 13 industries expecting production capacity increases for 2025 — listed in order — are: Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Computer & Electronic Products; Nonmetallic Mineral Products; Plastics & Rubber Products; Primary Metals; Fabricated Metal Products; Paper Products; Miscellaneous Manufacturing; Chemical Products; Machinery; and Transportation Equipment.

Services
The capacity to produce products or provide services in the services sector is expected to decrease 1.1 percent in 2025. This compares to an increase of 3.2 percent reported for 2024 and a December projection of a 2.8-percent increase for this year. Eighteen percent of services respondents expect their capacity for 2025 to increase, on average, 10 percent, and 12 percent foresee capacity decreasing, on average, 24.7 percent. Seventy percent expect no change in capacity. The 11 industries expecting production capacity increases for 2025 — listed in order — are: Arts, Entertainment & Recreation; Accommodation & Food Services; Information; Professional, Scientific & Technical Services; Mining; Utilities; Construction; Wholesale Trade; Real Estate, Rental & Leasing; Finance & Insurance; and Health Care & Social Assistance.

PREDICTED CAPITAL EXPENDITURES — 2025 vs. 2024

Manufacturing
Survey respondents expect a 1.3-percent decrease in capital expenditures in 2025, much lower than the 5.2 percent increase forecast by the panel in December. Sixteen percent of respondents predict increased (on average, 25.7 percent) capital expenditures in 2025, 21 percent said their capital spending would decrease (on average, 26.3 percent), and 63 percent expect no change. The seven industries expecting capital expenditure increases for 2025 — listed in order — are: Apparel, Leather & Allied Products; Primary Metals; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Paper Products; Miscellaneous Manufacturing; and Computer & Electronic Products.

Services
This year, services purchasing and supply executives expect capital expenditures to decrease 3.3 percent compared to 2024. The 15 percent of respondents expecting to spend more predict an average increase of 13.3 percent, 23 percent anticipate an average decrease of 23.5 percent, and 62 percent expect no change in capital expenditures in 2025. The five industries expecting an increase in capital expenditures are: Utilities; Retail Trade; Health Care & Social Assistance; Mining; and Other Services.

PRICES — Changes Between End of 2024 and May 2025

Manufacturing
In the December forecast, respondents predicted an increase of 3 percent in prices paid during the first four months of 2025; they now report prices increased by 4.7 percent. The 57 percent who say their prices are higher now than at the end of 2024 report an average increase of 9.3 percent, while 6 percent reported lower prices (by 9.2 percent, on average). The remaining 37 percent indicated no change for the period. Seventeen manufacturing industries reported an increase in prices paid for the first part of 2025, listed in order: Apparel, Leather & Allied Products; Furniture & Related Products; Petroleum & Coal Products; Computer & Electronic Products; Fabricated Metal Products; Textile Mills; Transportation Equipment; Machinery; Primary Metals; Wood Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Nonmetallic Mineral Products; Paper Products; and Chemical Products.

Services
Services respondents report that purchases during the first four months of this year cost an average of 4.3 percent more than at the end of 2024. This is the same percentage increase predicted in December. Fifty-two percent of services respondents report that prices increased, on average, 8.8 percent; 3 percent report price decreases of, on average, 6.2 percent; and 45 percent indicate no change. All 18 industries reported an increase in prices paid in the first part of 2025, listed in: Management of Companies & Support Services; Wholesale Trade; Other Services; Professional, Scientific & Technical Services; Accommodation & Food Services; Construction; Information; Retail Trade; Transportation & Warehousing; Public Administration; Finance & Insurance; Educational Services; Arts, Entertainment & Recreation; Health Care & Social Assistance; Agriculture, Forestry, Fishing & Hunting; Utilities; Mining; and Real Estate, Rental & Leasing.

PRICES — Predicted Changes Between End of 2024 and End of 2025

Manufacturing
Survey respondents expect a year-over-year, net-average prices increase of 7.5 percent for 2025. With respondents reporting price increases of 4.7 percent through April 2025, prices are projected to continue to increase the rest of the year. Sixty-seven percent of respondents project prices to increase, on average, 12.1 percent for the full year, 6 percent anticipate a decrease (10 percent, on average), and 27 percent expect no change. The 16 industries expect price increases for all of 2025, listed in order are: Electrical Equipment, Appliances & Components; Computer & Electronic Products; Machinery; Textile Mills; Primary Metals; Petroleum & Coal Products; Furniture & Related Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Plastics & Rubber Products; Paper Products; Fabricated Metal Products; Transportation Equipment; Nonmetallic Mineral Products; Chemical Products; and Wood Products.

Services
This year, services respondents expect prices to increase, on average, 7.3 percent compared to the end of 2024. With respondents reporting an increase of 4.3 percent through April 2025, prices are projected to increase over the rest of the year. Sixty-four percent of respondents anticipate increases of, on average, 12.8 percent; 6 percent expect decreases of, on average, 12.8 percent; and 30 percent do not expect prices to change. All 18 industries project price increases for all of 2025, listed in order: Management of Companies & Support Services; Professional, Scientific & Technical Services; Transportation & Warehousing; Public Administration; Wholesale Trade; Construction; Health Care & Social Assistance; Information; Other Services; Accommodation & Food Services; Agriculture, Forestry, Fishing & Hunting; Mining; Finance & Insurance; Utilities; Arts, Entertainment & Recreation; Educational Services; Retail Trade; and Real Estate, Rental & Leasing.

EMPLOYMENT

Employment — Predicted Changes Between End of 2024 and End of 2025

Manufacturing
ISM's Manufacturing Business Survey panelists forecast that sector employment in 2025 will decrease 0.1 percentage point year over year. Twenty percent of respondents expect employment to be, on average, 6.4 percent higher; 20 percent predict employment to decrease, on average, 6.5 percent; and 60 percent expect employment levels to be unchanged. The eight industries projecting employment growth during 2025 — listed in order — are: Nonmetallic Mineral Products; Petroleum & Coal Products; Computer & Electronic Products; Primary Metals; Fabricated Metal Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Transportation Equipment.

Services
Sector employment will decrease 1.6 percent in 2025, according to the forecast of ISM's Services Business Survey panelists. For the rest of the year, 16 percent expect employment to increase, on average, 7.2 percent; 17 percent anticipate employment to decrease, on average, 16.6 percent; and 67 percent expect no change in employment levels. The five industries anticipating increases in employment are: Accommodation & Food Services; Health Care & Social Assistance; Educational Services; Real Estate, Rental & Leasing; and Utilities.

BUSINESS REVENUES

Business Revenues Comparison — 2025 vs. 2024

Manufacturing
A minimal increase in revenues is expected this year, as purchasing and supply management executives predict an overall net increase of 0.1 percent compared to 2024. This is 4.1 percentage points lower than the 4.2-percent increase forecast in December, and 0.7 percentage point lower than the 0.8-percentage point year-over-year increase reported for 2024. Thirty-four percent of respondents say that revenues for 2025 will increase, on average, 9.7 percent; 22 percent say their revenues will decrease, on average, 14.1 percent; and 44 percent forecast no change. The eight manufacturing industries expecting increases in revenue in 2025 — listed in order — are: Primary Metals; Miscellaneous Manufacturing; Computer & Electronic Products; Chemical Products; Electrical Equipment, Appliances & Components; Printing & Related Support Activities; Food, Beverage & Tobacco Products; and Transportation Equipment.

Services
This year, services purchasing and supply management executives predict no growth in sector business revenue compared to 2024. This is 3.9 percentage points lower than the 3.9-percent increase forecast in December, and 3.7 percentage points lower than the 3.7-percent increase reported for 2024. Thirty-three percent of respondents indicate revenues for 2025 will increase, on average, 9 percent; 18 percent say their revenues will decrease, on average, 16.6 percent; and 49 percent expect no change. Nine of 18 services industries project revenue increases in 2025, listed in order: Accommodation & Food Services; Arts, Entertainment & Recreation; Finance & Insurance; Information; Wholesale Trade; Transportation & Warehousing; Health Care & Social Assistance; Professional, Scientific & Technical Services; and Utilities.

SPECIAL QUESTION TOPIC No. 1: ADJUSTING INVENTORY STOCKING STRATEGIES AMID GLOBAL TARIFF UNCERTAINTY

We asked panelists, "Have you changed your company's inventory stocking requirements to manage input pricing risks from global tariff negotiations and actions?"

Answer options:

• Yes, we are requiring higher levels of inventory
• Yes, we are requiring lower levels of inventory
• No, we haven't changed our requirements
• Do not measure input inventories

Respondents indicated:

SPECIAL QUESTION TOPIC No. 2: PRICE ADJUSTMENTS IN RESPONSE TO TARIFFS

We asked panelists, "How do you plan to change your selling prices for products or services in response to tariffs?"

Answer options:

• We plan to pass on all of the cost increases into sales prices
• We plan to pass on some of the cost increases into sales prices and to absorb some through reduced margins
• We plan to pass on some of the cost increases into sales prices and to pass on the rest to other untariffed products or services we provide
• We plan to absorb all of cost increases through reduced margins
• Our costs will not be affected by tariffs, but we plan to use tariffs as an opportunity to raise prices
• Our costs will not be affected by tariffs, and we do not plan to change prices because of tariffs

Respondents indicated:

SPECIAL QUESTION TOPIC No. 3: TIMING OF PRICE INCREASES DUE TO TARIFFS

We asked panelists, "How long will tariffs have to be in place for products or services impacted by tariffs before you raise your prices?"

Answer options:

• We raised or will raise prices in anticipation of the tariffs
• We will raise prices when the tariffed input prices increase
• We will raise prices if the tariffs last longer than a quarter
• We will raise prices if the tariffs last longer than six months
• We will raise prices if the tariffs last longer than a year
• We will not raise prices because of tariffs

Respondents indicated:

SPECIAL QUESTION TOPIC No. 4: ALTERNATIVE STRATEGIES TO NAVIGATE TRADE POLICY CHANGES

We asked panelists, "Besides raising prices, what other strategies are you implementing in response to recent or anticipated changes in trade policies?"

Answer options:

• We plan to increase inventory of imported inputs
• We plan to change the mix of products we sell
• We plan to change the specifications of products we sell
• We plan to reshore production domestically or move it to other countries
• Other (reasons)

Respondents indicated:

SPECIAL QUESTION TOPIC No. 5: PLANS TO RESHORE PRODUCTION

We asked panelists, "In the next six months, does your organization plan to reshore final or intermediate production from abroad?"

Answer options:

• Yes, we are actively looking into shifting production to the U.S. from abroad
• Yes, we are actively looking into shifting production domestically, but our plan will take longer than six months
• No, we are not reshoring to the domestic market but looking for alternative trade partners in less tariff-impacted countries
• No, we are not looking into changing our supply chain partners

Respondents indicated:

SUMMARY

Manufacturing

• Operating rate is 79.2 percent of normal capacity.
• Production capacity is expected to increase 1.8 percent in 2025.
• Capital expenditures are expected to decrease 1.3 percent in 2025.
• Prices paid increased 4.7 percent through April 2025.
• Prices of raw materials are expected to increase a total of 7.5 percent for all of 2025, indicating an expected increase of 2.8 percentage points for the rest of the year.
• Manufacturing employment is expected to decrease 0.1 percent in 2025.
• Manufacturing revenues are expected to increase 0.1 percent in 2025.
• The manufacturing sector is expected to be flat or grow slightly in 2025.

Services

• Operating rate is 86.5 percent of normal capacity.
• Production capacity is expected to decrease 1.1 percent in 2025.
• Capital expenditures are expected to decrease 3.3 percent in 2025.
• Prices paid increased 4.3 percent through April 2025.
• Prices of raw materials are expected to increase a total of 7.3 percent for all of 2025, indicating expectations of continuing inflation.
• Services employment is expected to decrease 1.6 percent in 2025.
• Services revenues are expected to be flat in 2025.
• The services sector is projected to be flat in 2025.

About This Report
In addition to the forecast, the Manufacturing ISM^® Report On Business^® is issued monthly on the first business day of each month and is considered by many economists to be the most reliable near-term economic barometer available. It is reviewed regularly by top government agencies and economic business leaders. The report, compiled from responses to questions asked of purchasing and supply executives across the country, tracks industrial production, new orders, inventories, supplier deliveries, employment, buying policies and prices. Manufacturing Business Survey panelists are divided into the following NAICS code categories: Food, Beverage & Tobacco Products; Textile Mills; Apparel, Leather & Allied Products; Wood Products; Paper Products; Printing & Related Support Activities; Petroleum & Coal Products; Chemical Products; Plastics & Rubber Products; Nonmetallic Mineral Products; Primary Metals; Fabricated Metal Products; Machinery; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Furniture & Related Products; and Miscellaneous Manufacturing (including products such as Medical Equipment & Supplies, Jewelry, Sporting Goods, Toys & Office Supplies).

Covering the services sector, ISM^® debuted the Services ISM^® Report On Business^® in June 1998. The Services ISM^® Report On Business^® is released on the third business day of each month and is based on data received from purchasing and supply executives from 18 different Services industries across the country. The Services ISM^® Report On Business^® is diversified by NAICS, based on each industry's contribution to gross domestic product (GDP). The Services Business Survey panelists are divided into the following NAICS code categories: Agriculture, Forestry, Fishing & Hunting; Mining; Utilities; Construction; Wholesale Trade; Retail Trade; Transportation & Warehousing; Information; Finance & Insurance; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Management of Companies & Support Services; Educational Services; Health Care & Social Assistance; Arts, Entertainment & Recreation; Accommodation & Food Services; Other Services (including Equipment & Machinery Repairing; Promoting or Administering Religious Activities; Grant making; Advocacy; and Providing Dry-Cleaning & Laundry Services, Personal Care Services, Death Care Services, Pet Care Services, Photofinishing Services, Temporary Parking Services, and Dating Services); and Public Administration. The report covers business activity, new orders, backlog of orders, new export orders, inventory change, inventory sentiment, imports, prices, employment, and supplier deliveries.

About Institute for Supply Management^®
Institute for Supply Management^® (ISM^®) is the first and leading not-for-profit professional supply management organization worldwide. Its community of more than 50,000 in more than 100 countries around the world manage about US$1 trillion in corporate and government supply chain procurement annually. Founded in 1915 by practitioners, ISM is committed to advancing the strategy and practice of integrated, end-to-end supply chain management through leading edge data-driven resources, community, and education to empower individuals, create organizational value and to drive competitive advantage. ISM's vision is to foster a prosperous, sustainable world. ISM empowers and leads the profession through the ISM^® Report On Business^®, its highly regarded certification and training programs, corporate services, events and assessments. The ISM^® Report On Business^®, Manufacturing, Services, and Hospital are three of the most reliable economic indicators available, providing guidance to supply management professionals, economists, analysts, and government and business leaders. For more information, please visit: www.ismworld.org.

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