Manufacturing CEOs’ rating of current conditions hit a 2026 peak in October. However, they also cut hiring plans, raised inflation forecasts and put a severe recession back on the table. Manufacturers are managing the gap between their rating and their forecasts by pushing their ambitions further ahead.
Chief Executive’s latest CEO Confidence Index, fielded October 6-7 among 321 U.S. CEOs, finds manufacturing CEOs rating current business conditions 5.9 out of 10, on a scale where 1 is Poor and 10 is Excellent. That is the sector’s highest reading of 2026, 11 percent above where it began the year at 5.3 in January and comfortably above its 5.6 average for the year. Non-manufacturing CEOs’ rating also improved, to 5.8.
Their forecast for conditions one year down the line did not follow. Manufacturers put future conditions at 6.0, a shade under the 6.1 they have averaged across 2026, while non-manufacturers slipped to 5.8. This month, 31 percent of manufacturers expect conditions to be worse 12 months from now, up from 24 percent in September, while the share expecting improvement fell to 43 percent from 47 percent.
Manufacturing CEOs echo that sentiment in their comments. “It feels like walking on ice right now even though business continues to be good,” says the CEO of a small industrial manufacturer, capturing a mood that shows up repeatedly in the responses.
The split between industrial and consumer producers narrowed this month. Industrial goods manufacturers rate current conditions 6.0 and expect 6.1 a year out, both unchanged or nearly so from September. Consumer goods producers came up to 5.3 in October, from 5.1, on current conditions, and forecast a 5.7 out of 10 for future conditions this month, up from 5.5 the month prior.
ECONOMIC OUTLOOK
Manufacturers are more bullish on the economy than non-manufacturers, and it shows up in many of their forecasts. Sixty percent of manufacturing CEOs forecast some kind of greater economic growth over the next six months, up from 57 percent in September, and the share predicting strong growth jumped to 13 percent from 2. At the same time, 2 percent forecast a severe recession—a category that drew no manufacturing responses at all in either August or September.
Non-manufacturers remain more cautious on both ends: 50 percent forecast growth and 16 percent expect a mild recession or slowdown, against 11 percent of manufacturers.
Cost expectations keep climbing. Manufacturers now expect headline CPI to run 3.9 percent over the next 12 months, up from 3.7 percent in September and 3.5 percent in August. “Fuel prices are now having an impact,” says the CEO of a mid-size agricultural manufacturer, adding that, “Current fiscal policy is not working with tariffs.”
When asked to explain what is driving their outlook, manufacturers and non-manufacturers point in different directions. Across all respondents, demand leads for manufacturers, cited by 27 percent against only 14 percent of non-manufacturers, and tariffs come up twice as often for manufacturers, 16 percent against 8. Non-manufacturers are far likelier to name policy or politics, 35 percent against 20 percent. When looking only at CEOs who expect conditions to deteriorate over the next 12 months, manufacturers lead with tariffs and demand—24 and 21 percent—while non-manufacturers lead with costs and politics, 38 percent each.
A SOFTER FINISH, A BOLDER TARGET
Manufacturers cut three of their four forecasts for how 2026 will finish against 2025. Capital spending was the exception—and it rose sharply:
- 71 percent of manufacturing CEOs expect revenues to increase by year end 2026 (compared to 78 percent who said the same in September)
- 62 percent forecast profits to increase (vs 65 percent the month prior)
- 38 percent plan to add headcount (down from 49 percent)
- 61 percent plan to add capital expenditures (an increase from 51 percent in September)
The proportion of manufacturing CEOs forecasting increases on the above measures by the end of 2026 still runs ahead of non-manufacturers on all four, most widely on capital spending, at 61 percent against 44 percent.
For manufacturers, the proportion planning to increase their headcount fell 22 percent since September while capital spending rose 20 percent. A pattern pointing to heavier investment in equipment rather than payroll.
The restraint does not extend to next year. This month’s Index also asked what CEOs are targeting for 2027, and manufacturers’ answers sit far above what they expect from 2026: 89 percent project revenue growth and 85 percent higher profits, with the proportion planning to add to headcount climbing to 57 percent. “The U.S. economy is resilient,” says the Bob Grote, CEO of Grote Company, an industrial food equipment manufacturer, and goes on “2027 will be excellent.”
AI REACHES THE ORG CHART—SLOWLY
Also new this month: whether AI use by employees has prompted companies to rethink jobs, roles or organizational structures. Our research finds that manufacturers are moving more slowly than non-manufacturers. Forty-two percent are either actively evaluating changes or already redesigning roles, against 53 percent of non-manufacturers. More than a quarter—27 percent—say either no or that AI use is not significant enough to prompt the discussion, double the 14 percent among non-manufacturers.
Where manufacturers do see it, they frame it as a fix for a labor problem rather than a headcount cut. “For us, AI means automating more of our skilled work,” says Matt Guse, CEO of MRS Machining, a CNC machining manufacturer. “We’ve struggled to find enough qualified people, which is limiting our growth. With greater automation, we could potentially double or even triple in size.” Others are unconvinced. “AI is not affecting productivity as much as advertised,” says the CEO of another small industrial firm.
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/
