U.S. Manufacturers Raise Capital Spending Outlook as Investment Pipeline Remains Strong

U.S. manufacturers expect modest increases in capital spending over the next year, reflecting improving business sentiment even as companies continue to face trade uncertainty, supply chain volatility, and rising costs.

Manufacturers project a 1.7% increase in capital expenditure over the next 12 months, according to the latest quarterly outlook survey from the National Association of Manufacturers. The forecast is up from 1.4% in the previous quarter and 1% in the third quarter of 2025, indicating gradually strengthening investment expectations.

The survey, conducted from Feb. 10 to Feb. 26, gathered responses from 240 manufacturers, including small, mid-sized and large companies.

About 41% of respondents said they expect capital spending to rise during the next year, up from 37.3% in the prior quarter. Another 42.7% anticipate no change, while 16.2% expect spending to decline. Large manufacturers reported the strongest outlook, projecting a 2.2% increase in capital investment over the next 12 months.

Manufacturers also reported improved confidence in their own businesses. Approximately 75.3% of respondents said they were optimistic about their company’s outlook, up 5.4 percentage points from the previous quarter and the first time since 2023 that optimism exceeded the survey’s historical average of 74.3%.

The survey results, however, were collected before the most recent escalation in global conflicts, meaning the outlook may not fully reflect the potential economic impact of ongoing war-related disruptions to energy markets, shipping routes, and global supply chains.

Even before those developments, manufacturers cited several structural challenges. Trade uncertainty remained the most frequently cited concern, identified by 70.6% of respondents for the fifth consecutive quarter.

Much of that uncertainty centers on the future of the United States-Mexico-Canada Agreement, which faces a required joint review by July 1. Under the agreement, the United States, Canada, and Mexico must determine whether to extend the pact for another 16 years or pursue changes.

Manufacturers remain deeply integrated into North American supply chains. Among companies that rely on both Canada and Mexico for critical parts of their supply chain, half said they depend on both countries, while about 55% said they source key inputs from at least one of the two markets.

“Manufacturers are ready for liftoff, but the skies need to clear,” said Jay Timmons, president and CEO of NAM. He said the survey underscores the importance of stable trade relationships and durable North American supply chains.

Supply chain volatility also remains a concern. Two-thirds of manufacturers reported increased supply chain volatility during the past 12 months, with about one-quarter saying disruptions have increased significantly. Only 8% reported reduced volatility.

Cost pressures are also expected to persist. Manufacturers anticipate raw material and other input costs will rise 4.1% over the next year, unchanged from the previous quarter’s forecast. Rising health care and insurance costs ranked as the top business concern, followed by trade uncertainty and raw material prices.

At the same time, project data suggests manufacturing investment remains robust.

Data from Industrial Info Resources shows U.S. manufacturing project spending reached $808.7 billion in February, more than double the $393 billion recorded a year earlier. The increase is driven in part by continued expansion of data centers and related technology infrastructure.

Industrial Info said it is currently tracking more than 1,100 manufacturing capital projects in the United States valued at more than $550 billion that are under construction, spanning sectors including semiconductors, transportation systems, distribution, and data centers.

Together, the survey results and project data indicate manufacturers are continuing to invest in facilities and capacity, even as companies navigate uncertainty around trade policy, supply chains, and the potential economic effects of geopolitical conflicts.

Do not miss any content from Distribution Strategy Group. Join our list.