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 Q3 2025.
Highlights from the Current Data (Aug. 2025)
- Manufacturing advanced slowly in its phase of acceleration, led by semiconductors & components, utilities, pharmaceuticals, motor vehicles, and aerospace.
- Primary metals like steel manufacture benefit from strong downstream demand including motor vehicles and aerospace. But primary metals costs remain high and have constrained growth in sectors with weaker demand like industrial machinery manufacturers.
- Strong gas demand, particularly among utilities has elevated broader oil and gas production. While oil and gas prices will remain elevated, declining oil prices are expected to reduce its output in 2026. Petroleum refining is also near a production high, but we expect demand will slacken entering 2026.
- Construction and consequently special purpose machinery continues to bear the brunt of higher interest rates, slower labor supply growth and an increasing cost of material.
Forecast for Next Six Months (Mar. 2026)
- We expect weaker spending on equipment and industrial production to start the year. Q1 demand for machinery and non-durable products will decline, pushing their movement on the graph into contraction while high value industries like semi-conductors and pharmaceuticals will continue to lead total manufacturing growth.
- Construction will approach the end a multi-year decline in 2026 and begin its recovery in the second half of year, aided by spending for new facilities for manufacturing and power generation.
- The slowdown in equipment spending will diminish demand for railroad equipment.
- Rubber production will continue to be hampered by a slumping motor vehicles and aerospace demand.
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