MT Magazine January/February 2026

THE INDUSTRY UPDATES ISSUE

FEATURE STORY

22

CONTRACT MANUFACTURING & MACHINE SHOPS

Agriculture, Construction, and Mining These sectors present a mixed outlook. In particular, construction shows private and residential construction contracting, while public construction is doing well as a result of Build Back Better initiatives. Interest rates continue to be a concern. 2026 looks to be a much stronger year for the industry than 2025, and manufacturers can capitalize on opportunities by selling equipment to companies in the AI-construction supply chain. Significant investment and demand continue to drive growth in this sector. Similarly, mining equipment saw improvement with stabilization in 2025, and growth is likely in 2026 and 2027. The supply of critical, rare-earth minerals captures headlines, and investment will likely increase in this area as the government gets more involved and geopolitical factors drive increased demand and competition for these resources. Agriculture faces headwinds from weak farmer sentiment, input cost inflation, and policy uncertainty. Trade issues have hit the sector hard, and while OEMs like John Deere are committed to manufacturing in the United States, they are also eyeing investments in Mexico. Crop prices for farmers are below the cost of production in some cases, which limits the capital they have for investing in new equipment. A modest recovery in production and sales is expected in 2026 for agricultural machinery like tractors and combines, but this may be contingent upon commodity price stabilization and improved financing conditions. AGRICULTURE, CONSTRUCTION, & MINING

Contract Manufacturing and Machine Shops Survey data from the National Tooling and Machining Association shows cautious optimism among small and medium-sized job shops, with reshoring activity increasing and automation adoption holding steady at around 30%, driven by persistent workforce challenges. However, backlog declines and tariff concerns are tempering growth expectations, and the anticipated capital expenditure for new machine tools and manufacturing technology is likely to drop next year. Projected business conditions among respondents have become more unfavorable. The data revealed that the strongest areas in the United States for job shops are currently the Northeast, North Central, and Central Southwest regions, likely due to huge growth in the outer space market. According to the Gardner Capital Spending Survey, more shops are turning to used equipment and flexible tooling solutions to manage costs and maintain competitiveness. Additionally, larger shops are better positioned to handle the economic headwinds in 2026 and represent a better opportunity for sellers than smaller ones, where every dollar spent is coming directly out of the owner’s pocket. Overall, MT customer markets represent a mixed bag of opportunities for next year, but any downturn is likely to be short-lived, as economists expect 2027 to bring renewed growth to the industrial sector. AMT President Doug Woods said, “This is one of the best times to be in manufacturing, as the advancements in automation, additive, digital manufacturing, and more offer an exciting future ahead.” Those in attendance at MTForecast have a similarly optimistic long-term outlook on the industry. While 2026 may prove to be a bumpy year, the next several years are looking promising for U.S. manufacturers, with numerous economic opportunities and excitement surrounding new technological advancements. Long-Term Outlook for Manufacturing Still Strong

If you have any questions about this article, please contact Chris at cmdowns@AMTonline.org.