What is Deloitte's Manufacturing Outlook for 2026?

As the US manufacturing sector emerges from a particularly turbulent 2025, industry leaders find themselves at a critical juncture.

Throughout much of the past year, the Institute for Supply Management's manufacturing purchasing managers' index languished below 50, signalling contraction across the sector.

Rising costs, declining employment and steadily falling manufacturing construction spending painted a challenging picture for the industry. Trade policy uncertainty and tariffs proved particularly burdensome, with more than three-quarters of manufacturers consistently citing trade uncertainty as their primary concern.

Yet amid these headwinds, a more optimistic narrative is beginning to take shape. The passage of the One Big Beautiful Bill Act introduces several tax provisions that could substantially lower costs and encourage manufacturing investment.

The announcement of revised US trade agreements with nations including the UK and Vietnam offers the prospect of reduced uncertainty. Meanwhile, anticipated interest rate cuts may help reignite demand for manufactured goods.

"The uncertainties manufacturers anticipate in 2026 will lead to more investment in smart manufacturing initiatives, which will be critical to driving future competitiveness and resilience," says Tim Gaus, Principal at Deloitte Consulting and Smart Manufacturing Business Leader.

"Despite the challenges in the year ahead, real growth catalysts exist."

Deloitte's 2026 Manufacturing Industry Outlook identifies five critical trends that will shape the sector's trajectory in the year ahead, from the transformative potential of agentic AI to adaptive workforce planning strategies.

1. Smart manufacturing and operations: The AI revolution continues

Investment in smart manufacturing technologies shows no signs of slowing as manufacturers seek competitive advantages in an increasingly complex operating environment.

Deloitte's 2025 Smart Manufacturing and Operations Survey found that 80% of manufacturers plan to allocate at least 20% of their improvement budgets to smart manufacturing initiatives, focusing on automation hardware, data analytics, sensors and cloud computing platforms.

"Manufacturers are focusing on automation, advanced analytics, cloud, and agentic AI to compete and adapt faster, driving measurable productivity, quality, and capacity gains," notes Tim. 

The aforementioned survey reveals that manufacturers view smart manufacturing as the primary driver of competitiveness over the next three years, delivering tangible benefits such as improved production output, increased employee productivity and unlocked capacity.

However, the emergence of agentic AI represents a quantum leap beyond traditional automation. 

This technology promises to add substantial value across the manufacturing value chain. Potential applications include identifying and engaging alternative suppliers during supply chain disruptions, capturing institutional knowledge from retiring employees, maximising production uptime through autonomously generated shift handover reports and improving customer experience by simplifying equipment repair processes.

Physical AI – robots with enhanced autonomy – represents the next frontier. A Manufacturing Leadership Council survey conducted in early 2025 found that nearly one-quarter of manufacturers plan to deploy physical AI within just two years, more than double current adoption rates.

These advanced systems, including robotic dogs and humanoid robots, can navigate unstructured production floor environments and accomplish complex tasks.

2. Supply chain: Digital tools address mounting complexity

The shifting landscape of trade and tariffs created significant uncertainty and increased costs for US manufacturers throughout 2025.

Despite varied strategic responses, trade uncertainty remained the top concern for 78% of manufacturers responding to the National Association of Manufacturers' third quarter 2025 outlook survey, with expectations that input costs will rise by an average of 5.4% over the next year.

"Supply chain complexity isn't abating; it's evolving," adds Tim.

"Leading manufacturers are deploying AI-driven trade analytics and autonomous agents to continuously assess risk, scenario plan and rebalance networks, improving visibility end-to-end while optimising cost and service across volatile trade and logistics conditions."

Sophisticated AI agents can monitor potential sources of disruption from trade policies, tariffs or weather events with visibility extending beyond Tier 1 suppliers. These systems can alert appropriate personnel when issues are detected, quantify potential financial and operational impacts, recommend alternative suppliers that balance risk and cost and even initiate mitigation steps including contract negotiations with human approval.

3. Manufacturing investment: Policy incentives and sector growth

Several factors – including US policy developments – could encourage further reshoring to the US.

Recent policy changes have strengthened investment incentives, with the One Big Beautiful Bill Act retaining the 21% corporate tax rate while making permanent other tax-saving provisions including full expensing for new equipment and immediate expensing of domestic research and development.

"The data centre boom and ongoing semiconductor investment are spurring multi-year agreements to produce key components and expand US production to meet growing demand," Tim observes.

Data centre growth is creating substantial demand and driving significant investment. Startups focused on small modular reactors attracted US$3.9bn in funding during 2024, representing a tenfold increase from 2023. Several large original equipment manufacturers have reported multi-year agreements to produce key components such as transformers, switchgear and power management equipment, with some sold out for multiple years.

Semiconductor manufacturing investment is set to continue on its upward trajectory. As of July 2025, companies have announced more than US$500bn in private sector commitments to revitalise the US chipmaking ecosystem – potentially tripling domestic capacity by 2032.

These projects are expected to create more than 500,000 jobs across the US.

4. Aftermarket services: Agentic AI transforms CX

Aftermarket services represent a crucial revenue source and profit driver for industrial manufacturers, delivering margins more than twice as high as equipment sales alone. They also create predictable, less cyclical revenue streams and strategic differentiation – factors that could prove essential for maintaining competitiveness during periods of economic uncertainty.

"Aftermarket services are another bright spot," says Tim.

"AI agents can help manufacturers move from reactive to predictive service, boosting uptime and customer experience."

A key objective for aftermarket services involves moving toward proactive planning, ensuring the right expertise, parts and tools are available at the point of service when required. Agentic AI advances this goal by taking autonomous action on data across multiple internal and external systems, including dealer inventories, service schedules, customer platforms and manufacturing execution systems.

With appropriate human oversight, an agentic aftermarket system could autonomously detect component wear on farm machinery based on usage patterns, then order parts, reallocate inventory, schedule service and optimise part manufacturing quantities based on real-time demand.

Such systems could dynamically adjust service-level agreements based on equipment usage and risk patterns, automatically upgrading heavily used equipment to priority servicing.

5. Talent: Adaptive workforce planning for uncertain times

Competition for skilled labour remains intense, particularly as manufacturers invest in advanced digital tools and smart manufacturing facilities. More than a third of the 600 manufacturing executives surveyed by Deloitte in 2025 identified equipping workers with the skills and knowledge needed to maximise smart manufacturing potential as their top concern.

The skill sets companies require may shift if they adjust product portfolios to maximise profitability in response to fluctuating tariff costs. If reshoring trends accelerate, the supply of skilled workers could become increasingly strained. Shifting immigration policies may further impact the labour pool, as immigrant workers filled nearly one in four US manufacturing production jobs in 2024.

A "build, buy or borrow" framework for workforce planning could help manufacturers remain agile:

• 'Build' involves investing in talent most important to core business operations, including wages, skills and employee experience
• 'Buy' involves recruiting external personnel with critical expertise that may take longer or cost more to develop internally
• 'Borrow' refers to hiring temporary workers or third parties to help meet fluctuating demand for roles with less impact on core operations.

Manufacturers could also leverage technology to enhance talent sourcing, screening and training processes. For instance, agentic AI could capture workers' tacit knowledge and generate standard operating procedures, thereby accelerating onboarding and training.

Seizing new opportunities

Tim's belief is that the manufacturers seizing new opportunities and continuing to invest in smart manufacturing will be "well positioned to navigate volatility, unlock new growth and widen the competitiveness gap."

The path forward demands both technological sophistication and strategic agility.

Those who successfully balance investment in smart manufacturing with adaptive workforce planning while harnessing growth opportunities in semiconductors, data centres and aftermarket services will surely emerge stronger.