U.S. Manufacturing Subsector Business Cycle Graph
Manufacturers Alliance and Oxford Economics create this quarterly graph to illustrate where different subsectors in manufacturing currently are in their business cycle. The chart below shows their status as of Q4 2025.
Highlights from the Current Data (Dec. 2025)
- Manufacturing is advancing further into expansion, led by semiconductors and components, pharmaceuticals, and defense-related goods like aerospace.
- Primary metals (e.g., steel) are gaining momentum, supported by stronger‑than‑expected demand from transportation equipment.
- Utility’s consumption of natural gas remains elevated competing alongside household demand. Oil production is near record highs, weighing on prices; with muted forward price expectations, near‑term investment in future capacity (e.g., drilling and refining equipment) remains subdued with weaker oil production forecast.
- After a soft patch, construction activity appears to be bottoming as expected rate cuts are drawing buyers back into the housing market. Early indicators show firmer construction demand for specialty equipment and building materials such as lime, gypsum, and steel.
- Chemical output—a traditional leading indicator for industrial output—appears to be nearing a cyclical peak as we forecast the slowest pace of industrial growth in Q1 in a year.
Forecast for Next Six Months (Jun. 2026)
- Manufacturing will enter an extended period of expansion with an accelerating pace of growth due to cyclical and secular trends with the negative impact of tariffs in the rear-view.
- Utility output is unlikely to slow, as data‑center demand continues to boost electricity generation. Production will be limited by capacity constraints.
- After a short contraction in early 2026, fabricated metal products are expected to return to expansion on stronger demand from machinery and construction.
- Construction is projected to end its multi-year downturn by mid-2026 and recover in the second half, supported by new power-generation investment and lower long-term rates that should improve residential building and homebuying.
- After sustained demand from utilities and high-tech, electrical equipment is expected to slip into a mild, brief contraction before re-accelerating toward late 2026.
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