Why This Matters to Distributors: Manufacturers and service-sector companies are forecasting stronger growth in 2026 despite rising costs and ongoing trade uncertainty. The outlook points to continued demand for industrial, electrical, construction and business products, while higher material costs could keep pricing and inventory management at the forefront for distributors.
Manufacturers and service-sector companies expect business conditions to remain favorable through the rest of 2026, according to the latest Supply Chain Planning Forecast from the Institute for Supply Management.
The report projects manufacturing revenue will increase 8.4% this year, while service-sector revenue is expected to rise 8.6%. Both forecasts represent an improvement from ISM’s previous outlook, suggesting businesses remain optimistic despite inflation, tariffs, and geopolitical uncertainty.
For distributors, the report points to continued customer demand across many end markets, particularly those tied to manufacturing, construction, infrastructure, and technology investment.
Manufacturers surveyed by ISM expect production capacity to increase 6.2% in 2026 and plan to boost capital spending by 5.2%. Respondents reported operating at 86.9% of normal capacity, indicating factories continue to run at high utilization levels.
At the same time, manufacturers expect prices paid for raw materials to rise 14.1% this year, underscoring the cost pressures that continue to move through supply chains.
The combination of rising production, capacity expansion and higher material costs could create opportunities for distributors that help customers manage inventory, secure supply, and improve operating efficiency.
The service sector also reported a positive outlook. Companies expect to operate at 91.3% of normal capacity and forecast revenue growth of 8.6% during 2026. However, service-sector respondents expect prices to increase 8.9%, reflecting ongoing inflationary pressures across transportation, logistics and business services.
Wholesale trade was among the industries reporting growth expectations for the year, a positive sign for distributors and suppliers serving business customers.
The forecast comes as companies continue to navigate an uncertain operating environment marked by shifting trade policies, supply chain disruptions, and geopolitical tensions. Despite those challenges, ISM respondents cited continued investment in artificial intelligence, automation, and data center development as important growth drivers.
Those trends are particularly relevant for distributors serving industrial, electrical, automation and construction markets, where demand continues to benefit from large-scale investments in manufacturing capacity, infrastructure, and technology.
The report suggests businesses remain focused on expansion rather than retrenchment, even as they prepare for higher costs and a more volatile economic environment.
For distributors, the message is clear: demand remains healthy, but managing inflation, pricing and inventory will remain critical to maintaining margins through the remainder of 2026.
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