Forecast 2026 (CONT’D FROM PAGE 34)
dicators for an idea of how the year will turn out: • Employment: “I would pay close attention to the unem- ployment rate,” said Yaros. An unexpected decline in employment would spur faster interest rate cuts as the Fed seeks to reinforce economic expansion • Consumer spending: “How is the consumer faring?” poses Basu. “Bear in mind that many low and middle income people are exhausted financially. Indebtedness and delinquencies are up for credit cards, mortgages and loans.” • Inflation: “If we get stubbornly high inflation, that will prevent further progress on interest rate,” said Basu. Oxford Economics still expects the nation to avoid a re- cession, and the expected 2 percent GDP growth is right around the level economists peg as the nation’s “natural growth rate”—one that supports business activity, main- tains full employment, and avoids triggering inflation. Perhaps of even greater importance, though, is a lit- tle heralded threat to productivity. “One thing that sort of permeates the whole economic picture right now is the nation’s low population growth rate,” said Conerly. “Immi- gration is down, due to Trump administration policy. The next generation entering their working years is about the same size as the retiring boomers, so there will be no net growth in the labor force.” Responding to this trend, Conerly noted, “The focus of businesses in 2026 will be increasing productivity through better tools, better training, and better managers.”
few years,” noted Basu. “Construction materials are more expensive. And of course there are tariffs on items like steel, aluminum, and copper.” Little wonder the high cost of doing business is top of mind for many operators. “As we head into 2026, the area of most concern for manufacturers is profit margin,” said Basu. “Many operators are simultaneously experiencing an increase in costs of delivering services while demand fades.” Given the variety of business concerns, it’s little wonder many projects are being put on hold. “It’s hard to engage in cost savings when both materials and labor are becom- ing more expensive,” said Basu. “Too often, the pro formas don’t pencil out. Many manufacturers are responding by not expanding their operations and trying to trim expendi- tures at the margins. They are focusing more on cash flow preservation by slowing hiring, and being less aggressive in leasing and purchasing equipment, particularly equip- ment impacted by tariff pricing.” This generalized business hesitation is evidenced in the numbers. “We look for business investment to increase by only 1.6 percent in 2026, after rising by 3 percent in 2025 3.6 percent in 2024,” said Yaros. Looking Ahead As we enter the early months of 2026, economists sug- gest that manufacturers watching these key economic in-
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