Since the start of the year, manufacturing CEOs have been describing their sector as caught between persistent near-term pressures and cautious optimism about what lies ahead. In June, that gap began to narrow.
According to Chief Executive’s latest CEO Confidence Index, fielded June 2-3 among 315 U.S. CEOs, manufacturers rated current business conditions 5.7 out of 10, on a scale where 1 is Poor and 10 is Excellent. That marks a 4 percent increase from May and the first improvement in manufacturers’ assessment of current conditions since March, suggesting that some of the pressures weighing on sentiment this spring may be beginning to ease.
Manufacturing CEOs are also more upbeat about the year ahead. They now expect business conditions 12 months from now to reach 6.3 out of 10, up from 6.0 in May. The improvement marks the first time in months that manufacturers have become more positive about both current conditions and the outlook ahead.
Manufacturers have also been more optimistic about the future than their non-manufacturing peers since April, and that gap widened some more in June. While non-manufacturing CEOs held their 12-month outlook steady at 6.0 /10, manufacturers’ forecast came in 5 percent higher, underscoring the sector’s growing confidence despite continued uncertainty.
Asked what’s driving the improvement in sentiment, many manufacturing CEOs pointed to stronger demand, healthier order books and signs of greater stability in their own businesses and end markets.
“Orders are up over 12 months ago. The industries we serve are predicting growth over the next 24 months. We continually find the right talent for the fair market salaries we pay,” says Jason Stanczyk, CEO of Equipment Development Company, a small, family-owned industrial manufacturing firm.
Others described a similar shift from uncertainty to execution. Peter Ensch, CEO of Sani-Matic, a mid-sized industrial goods manufacturer, says he “believe[s] manufacturing is entering a phase of stability as business leaders have grown accustomed to the constant chaos of the current administration combined with pent-up demand, leading to projects being released.”
But the recovery in confidence remains uneven. For many manufacturers, cost pressures, tariff uncertainty, regulatory strain and supply chain disruption continue to weigh on margins and customer demand.
Katie Malnight Meisinger, president of RELY Contract Manufacturing, says “geopolitics [is] driving up fuel and raw material prices which is eating into margins, dampening demand and/or causing customers to push out timelines.”
Manufacturers with exposure to government work also cited policy uncertainty and regulatory burdens as pressure points, with some pointing specifically to “government research funding policies” and “constant supply chain disruptions” as challenges that continue to complicate planning.
ECONOMIC OUTLOOK
Manufacturing CEOs’ economic outlook improved sharply in June, reversing much of the drop-off recorded earlier this spring. After peaking in March, when 67 percent of manufacturers expected the U.S. to experience growth by year-end, that share fell to 48 percent in April and 50 percent in May. In June, 63 percent once again forecast some form of growth before the end of the year.
That puts manufacturers ahead of their non-manufacturing peers, 54 percent of whom expect the U.S. economy to grow over the same period. The shift may reflect improving demand, as well as renewed interest in reshoring and domestic capacity expansion amid continued tariff and regulatory uncertainty.
Recession fears also appear to be easing among manufacturers. While the share of non-manufacturing CEOs forecasting a severe recession within the next six months has risen steadily since March, reaching 4 percent in June, no manufacturing respondents made that forecast this month.
CONFIDENCE DRIVERS
Improved demand is a key driver of manufacturers’ stronger outlook this month, but CEOs also point to diversification and market expansion as important sources of growth in a volatile environment.
Nearly three in four manufacturing CEOs say that over the past five years, their companies have entered new sectors, customer categories, geographic markets or use cases for their products and services.
That expansion is expected to remain central to competitiveness. Looking ahead three to five years, 82 percent of manufacturers say diversification will be either critical or important to their company’s ability to grow and remain competitive. Just 1 percent say it is not a priority.
CORPORATE FORECASTS
Even as overall confidence improved in June, manufacturing CEOs’ corporate forecasts were more mixed, suggesting caution about converting stronger sentiment into aggressive growth plans.
Compared with May:
- 74 percent forecast revenues to increase this year (down from 76 percent in May)
- 66 percent expect profits will increase this year (down from 69 percent in May)
- 46 percent plan to add to their capital expenditures (unexpectedly up from 41 percent in May)
- 45 percent plan to add to their headcount in 2026 (down from 51 percent in May)
- 48 percent foresee increases to their operational expenditures (down from a steep 77 percent in May)
About the CEO Confidence Index
Since 2002, Chief Executive Group has been polling hundreds of U.S. CEOs at organizations of all types and sizes, to compile our CEO Confidence Index data. The Index tracks confidence in current and future business environments, based on CEOs’ observations of various economic and business components. For additional information about the Index and prior months data, visit ChiefExecutive.net/category/CEO-Confidence-Index/
