The manufacturing sector is primed for a solid performance in 2026. The industry dynamics mirror the themes we see nationally across different sectors, as business leaders are focused on disciplined growth and execution.

Multiple data points support this constructive outlook. The most recent ISM Manufacturing PMI Report found that economic activity in the sector expanded for the third consecutive month. The latest CapEx Finance Index (CFI), from the Equipment Leasing & Finance Association, showed that equipment demand remained strong in February. This came on the heels of the Dec. 2025 CFI report that found equipment demand reached its second-highest level ever. And the labor market is in a more favorable position than it has been for the past three years as the job market is more competitive and wage inflation has eased, although it remains higher than inflation overall.

The key question for manufacturers is how to continue to make capital investments as uncertainty and volatility have become the new normal.

One of the major themes that comes up in our discussions with manufacturers is supplier diversification. Tariffs, particularly Sections 232 (on steel and aluminum imports) and 301 (on foreign nations engaging in unfair trade practices), have encouraged manufacturers to diversify their supply chains both domestically and globally. Manufacturers know they need multiple suppliers from multiple countries, if possible. Sourcing is a major component of working capital. Volatility in commodity and raw material prices means manufacturers need a working capital plan in place, whether it’s asset-based lending or hedging strategies.

As the 2026 BMO Business Outlook pointed out, uncertainty and volatility on multiple fronts are still prevalent. But the path to stability and flexibility has become clearer. For manufacturers, that means understanding they need a capital investment mix for supporting both maintenance and growth. Manufacturers should also consider hedging strategies on interest rates and commodities. The key is to understand how much risk you’re comfortable taking, and that requires working with your financial partners on strategic and tactical planning.

Strength in manufacturing is not just a Midwest story. Our industry clients stretch from Los Angeles to Miami. Some of the key trends to watch nationally include:

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  Data center/AI-related development

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  Attractive state tax incentives

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  Reshoring

The narrative is largely the same everywhere, as our state and regional Business Outlook reports make clear:

In Arizona, advanced manufacturing and semiconductors remain central to the state’s long‑term growth profile, supported by reshoring activity, federal investment, and the state’s role in national supply chains



Florida continues to attract investment and job creation in advanced manufacturing



Manufacturing remains Indiana’s economic cornerstone, with the state showing strength in chemical and pharmaceutical manufacturing.



In Northern California, advanced manufacturing and data center-related demand have helped boost the region’s industrial markets



Oregon has seen expanding investments in data centers and AI-adjacent manufacturing



In Utah, advanced manufacturing is expanding due to reshoring trends and Western supply-chain realignment.

While the manufacturing industry has been one of the stronger sectors nationwide, the big issue for manufacturers is how to continue making capital investments. Think about it in terms of two buckets: maintenance capex and growth capex. In 2025, what we saw among manufacturers was that much of the maintenance capex that could be deferred was deferred. Now, we’re seeing that capital spending come back online for both maintenance and growth projects. The key is for manufacturers to find the optimal balance between executing for today while planning for tomorrow.

Uncertainty regarding sourcing, tariffs, and customer demand have made that equation challenging. A potential solution is asset-based lending, which provides flexible financing options and allows companies to maximize capital by accessing the full value of their balance sheet assets. By providing visibility into your borrowing capacity and operational flexibility, asset-based lending delivers access to capital while enabling strong liquidity management.

For manufacturers, the tailwinds from 2025 should grow even stronger in 2026. There’s an opportunity to take advantage of the demand that’s there, and to make the investments that will drive businesses forward for the next several years. This is the year for manufacturers to take the next step.