Podcast: Manufacturing technology demand in 2026
Key Highlights
- Manufacturing tech demand turned a corner in 2025, with late-year growth signaling recovery after two years of decline.
- Higher machine tool order values reflect rising automation, not unit growth, as manufacturers invest in efficiency amid labor shortages.
- Aerospace and electrical energy sectors are driving strong machine tool demand, fueled by backlogs, grid upgrades, and data center growth.
- Tax incentives and fiscal policy had more impact on equipment investment than rate cuts, shaping capital spending decisions in 2025.
There are interesting and encouraging data points amid all the confusion, with some trends emerging about job shop activity, high-demand industries, and manufacturing employment. New orders for CNC machines are a reliable indicator of near-term growth in manufacturing activity - in nearly every major manufacturing sector - because those purchases mean operations are preparing for new business coming their way. And 2025 order values are on pace to top 2024.
So what is the continuing debate about interest rates and inflation? And what trends might we watch bear out in 2026? In this episode of Great Question: A Manufacturing Podcast, AMT principal economist Chris Chizik describes what the data reveals about manufacturing growth.
Below is an excerpt from the podcast:
RB: Hello, and welcome to a new installment of the Great Question Podcast presented by Endeavor Business Media's Manufacturing Group. I'm Robert Brooks with American Machinist and Foundry Management Technology. And today we're going to look at US manufacturing technology demand as we begin 2026. My guest, a returning guest and friend, is an expert on this subject. Chris Chizik is the principal economist with AMT, the Association for Manufacturing Technology. Welcome, Chris. Thanks for coming back.
CC: Thanks for having me.
RB: AMT is the trade association for manufacturers, suppliers, and operators of manufacturing technology, by which we mean broadly CNC machining systems. Mr. Chizik will be among the speakers at the 2026 AMT Winter Economic Forum, Friday, January 20th, from 9 a.m. to 2:15 p.m. And many of the issues we're talking about today will be reviewed in much greater detail there. And registration is free, so I encourage listeners to look into that at amtonline.org. Manufacturing technology, or machine tools, describes all the capital equipment used for machining, cutting, turning, grinding, drilling, and forming, and more. The orders for new manufacturing technology are reliable indicator of near-term growth in manufacturing or even industrial activity in automotive and aerospace, construction, defense, energy, nearly every major manufacturing sector, because those operations are making those orders as they prepare for a new business coming their way. And this is the subject of the monthly U.S. Manufacturing Technology Orders report that AMT and my guest prepare each month.
Earlier this month, AMT issued the November 2025 report, so we're not quite at the full picture for 2025. We learned that November machine tool orders were down significantly from October, but they are consistent with late year investments over an extended period of time. and that the 11-month order value for 2025 is 5% higher than the 12-month order value for 2024, which I think is a very salient point. But following that release, Chris, AMT reported that industrial production increased 0.4% and capacity utilization increased 0.2% across the US economy from November to December, so the period for which we don't have the full picture on manufacturing technology orders. And that's from the Board of Governors of the Federal Reserve System. So here we go with the Federal Reserve System. Manufacturers underperformed the overall economy with industrial production increasing 0.2% and capacity utilization remaining flat. There is something here because there's pressure on the Federal Reserve Bank to reduce interest rates again now or soon as it did three times in 2025. OK, enough of me. Will you explain the Fed's objectives when they are adjusting interest rates?
CC: Yeah, so the Federal Reserve was created by an act of Congress, and in that act of Congress, it gave the Federal Reserve a mandate. A lot of times they'll refer to it as the dual mandate, and that mandate is maximum employment and price stability. They're intentionally a little bit vague to give a little bit of leeway, but over time, through practice and refinement, the Federal Reserve has really defined that as the fullest employment available without triggering inflation and keeping inflation steady at about that 2% target.
RB: So we are at 2.7% according to every report on this, and that's down considerably over the past two years. So they're moving things in the right direction, but seemingly for a lot of people in politics, not fast enough. How does manufacturing growth rank then? I mean, you said, you pointed out price control or, you know, they're addressing inflation and they're maximizing employment. So what about industrial growth, manufacturing growth? How does it figure into their objectives?
CC: So it definitely figures into their considerations. But just like any other sector of the economy, they don't target one specific sector for growth or anything like that. Monetary policy is a very broad tool meant to stimulate or kind of restrict the entire economy at the same time. And what's really important in noting is that monetary policy tends to work through demand channels. So when interest rates go up, credit becomes less available because it's more expensive. When they go down, credit becomes more available. And that generally affects people's decisions to buy. And manufacturing is a little bit more on the supply side. So although monetary policy is that tool to affect demand, it does have residual effects because you still need to buy equipment, you may need to finance it, and whether it may be more or less expensive. is determined by the interest rate, but it primarily does moderate economic activity through demand channels.
RB: And we know from the November report of USMTO that things are in line historically with where they where they come at the in the fourth quarter or at the end of at the end of an annual year when budgets are rolling over and so forth. So what does Based on the data we have January to November, what can we conclude about 2025 manufacturing technology demand?
CC: I think the biggest point is we've turned the corner. So coming out of the 2020 recession, there was a huge spike in demand for manufacturing technology. Consumers were changing how they buy goods, shifting more to goods rather than services. The government was increasing spending on projects such as infrastructure, military investment, things like that. And there was a huge spike in demand for manufacturing technology. Now, for the last two years, it has been in decline. And I think 2025 was that inflection point where we're seeing demand start to pick up again. And although it's not across the board of a pickup, it still is significant enough that the market is increasing, particularly toward the latter half of the year.
RB: And do you think that those three rate cuts in 2025 were consequential that way, or were they just sort of keeping the demand on the glide path, if you will, that they had been on otherwise?
CC: I think they're kind of keeping demand on the glide path, because if you listen to a lot of the statements after interest rate decisions, the interest rate right now is already debatably still in restrictive territory. So by those three rate cuts, they're going back toward a neutral rate where unemployment isn't going up or down, inflation isn't going up or down. They're moving back toward that glide path. And Unfortunately, you don't really know what that neutral rate is. It's always estimated. You kind of move things, see how other variables react, and then steer back and forth. And with something the size of the US economy, you can't turn course very quickly. So they're being very cautious in how far they go with those rate cuts. I think something that was far more consequential to manufacturing technology orders in 2025 was the tax and spending bill that was passed in the middle of the summer, sometimes called the Big Beautiful Bill, although I don't know if I've ever seen a law that I'd call beautiful. But I think that was far more consequential to manufacturing technology orders because they had a lot of favorable tax incentives for investment in this technology. Now, it's not to say that lowering interest rates don't have an effect. I think the fiscal aspect has much more of a direct impact.
RB: So there's not an easy connection between stimulating consumer activity and consider and stimulating industrial activity. So that that's part of the obviously part of the difficulty in understanding this. Automotive sales are not just going to suddenly jump through the roof. I mean, unless you say there's no there's zero interest, you know that sometimes does it, but you know. But that's not going to stimulate machine tool orders on a quarter, except maybe like on a full year basis.
CC: So potentially in a longer run, yes, if that demand is sustainable, not just a short term pop from easy money.
RB: Okay, so let's go back to that November report. Order values are improved and expanding year over year, but unit orders are down. And you've been paying attention to this, and you and I have discussed this, but will you explain for our listeners What is happening there? Why are the order values up and unit orders down?
CC: So units are actually up slightly. There's a big gulf between the dollar values and the unit values, like you point out. I think dollars are up around 17.8%. Units are only up about 6%. And I think a lot of that has to do with the level of automation that's now in demand. So where units may not sell as much, you're adding a lot more to that machine in terms of ways to make it more efficient. And that really increases the dollar value while keeping the number of units roughly the same.
RB: And this is a long term trend. This is not something that's going to reverse itself, is what you're concluding here. Well, you're not concluding it. I'm concluding from what you're saying that what this means is that unit values are going to continue to climb and remain higher in value than they have been in the past. You know, we'll have to then track, you know, what is a new baseline for value and what is what is a baseline for unit totals, right? So we have to have a sort of a new understanding of what manufacturing technology incorporates here in a way. I mean, that's my conclusion, not yours.
CC: No, exactly. And if you look at the average order value over time and compare it to inflation on machine tools, which is a data series that the government puts out, there are spikes over time where average order value spiked above the level of inflation, and it kind of coincided with different periods of increased demand for automation. But what we've been seeing since the end of the 2020 recession is an extremely elevated sustained demand that really doesn't have any other historical comparative. And I think a lot of it goes back to labor availability issues.
RB: Right. Completely separate from any investment or monetary policy of all. Right. Well, I'll have to find another guest to talk to me about skills. OK, you've identified some weakness in demand from contract machine shops. And that's a place, of course, where employment matters can matter quite a lot. So is that weakness in demand a response to the higher machinery costs or is it related to this employment issue or what do you think is going on there?
CC: I think it's a little bit across the board. I think it does have to do with increased values of machinery, but I think on the other hand that it's a symptom of OEMs that typically would outsource a good number of new work. whether they're unsure if that demand is going to be sustainable or if they know that it fits in with their investment cycle. If there's a short term pop in demand and they're already in the middle of procurement and putting in new lines, they're not really going to go out and change their plans. They're going to help source that. And I think recently OEMs have been realizing that certain demand areas are here to stay, particularly in the aerospace sector. Automotive has done some really interesting retooling the last couple years, and I just think that not that much work is trickling down job shops as it used to. Now that's always. That's not necessarily a permanent new state of the market. I think once a lot of these investments come online, then job shops will start to pick up and we are starting to see it slightly in the data. It's not consistent, but job shops have been starting to pick up orders recently.
RB: That's very interesting. If it continues that we may have to classify that as a supply chain detail that that that's worth studying. Yeah, thanks for that. Okay, let's look at the pick that the market in 2026. What do machine tool or manufacturing technology orders suggest about other major industrial sectors? You typically break out several of them in the monthly report, like automotive and aerospace. What do you see are the trends emerging there in manufacturing technology demand?
CC: The 2 that I really want to highlight are aerospace and energy. Aerospace has been in a rapid buying cycle for the last two years. And if you remember in 2024, there was the machinist strike at Boeing. Then this year there was the defense machinist strike. And those labor issues really kind of pulled back aerospace's ability to put out product. However, As soon as those labor issues are resolved, capacity utilization spikes right back up to where it was, and then manufacturing technology orders start to go up again. If you look at backlogs in the aerospace sector, if you look at new orders coming in, it's they have a lot of work to do. So I don't think that's demand from the aerospace sector is going to be cooling anytime soon.
Secondly is energy, and I specifically When I say energy, I specifically look at electrical. There is a huge shortage of pretty much every electrical component possible, transformers, relays. I'm not an electrical engineer, so I only know a couple, but there is a huge shortage. And first through strengthening our current grid, there's been a lot of efforts to retrofit a lot of things because it's old, aging, needs to be more efficient. And the real wrench in the machine right now is data centers, and they are just drawing massive amounts of power and public utilities are really struggling to keep up. If you look at manufacturing technology orders in that space, electrical equipment manufacturers have been ordering about 20% above their long term average for the last two years. So it's not the largest sector, but it does have very strong growth potential.
RB: Well, the construction program for data centers is mind-blowing. And if they succeed in building them all as they do, we're inevitably going to get to the point where we have to build more power plants too in order to keep them processing data. So that's probably a trend that has at least a decade run in it. if we can rely on the trend and the evidence available to us now. OK. The trends in aerospace, does that incorporate defense spending or is defense spending separate?
CC: So in our data in USMTO, we collected the five digit level. So aerospace includes defense, but there are government sources of data available. You can separate the two. And while primarily commercial aerospace is driving a lot of the demand right now, defense is also at a pretty good uptick.
RB: They're very much the same suppliers across both supply chains. So what a lot of investors are critical of the tariff programs is, you know, throughout 2025, but does do manufacturing technology orders or trends show any positive or negative effects from tariffs.
CC: So looking at our data, there isn't really much evidence of an effect of tariffs currently. It's a little bit of a muddy picture because it's one of those situations where a lot of things are happening all at once, and it hasn't been super easy to extrapolate what the effects have been so far. I'm sure there's one of those, this is one of those things that we just need to wait, see what the data says, and then assess what's happening.
RB: Yeah, I have a feeling that's kind of, that's information that's not going to come to us through orders or reporting. It's going to come to us from quarterly statements and investors commentaries and that sort of a thing. Okay, so the job administration clearly wants to encourage manufacturing activity. Are there other economic measures available that we might see them try to apply in 2026?
CC: The thing that I would probably promote the most is any kind of skills development or labor force programs. Although we've been having a great year for manufacturing technology orders, there's still about 400,000 open positions in manufacturing. And if we really want to help the industry to put out more product domestically, as well as continue their demand for manufacturing technology, I think addressing that skills gap and getting more people interested in a manufacturing career is the way to do it. And I, you know, I know we've talked a lot about automation and stuff and it's really easy for people to, you know, shake their fists and go, oh, the robots are taking our jobs. But in a lot of instances where this technology comes in and where automation is more available, it makes manufacturing a much more attractive career prospect. You know, instead of being on the floor doing grunt work day in and day out, you're doing less physically demanding things, less repetitive things. you're able to do more high value functions such as designing things, testing things, rather than just, you know, the day-to-day things that can't or can be automated. So I think developing that labor force is the number one thing that can be done.
RB: Yeah, it's a hugely important issue. I don't think anybody who's been in manufacturing for more than a year or two is in any doubt about that. There needs to be something comparable to the big, beautiful bill that encourages hiring and retention of these workers. But in any case, that's not in the data. And I won't press you any further on that. Thank you, Chris, for your insights on these topics. I hope we'll discuss all of them again too. And I want to remind listeners, they should note that Chris will be among the speakers at the 2026 AMT Winter Economic Forum Friday, January 20th. 9 A.m. to 2.15 P.m. Many of the issues we're talking about today will be reviewed in much greater detail there. And registration is free. So I encourage all you listeners to look into that at amtonline.org. Thanks, of course, for listening to the Great Question Podcast presented by Endeavor Business Media's Manufacturing Group.
About the Author
Robert Brooks
Robert Brooks has been a business-to-business reporter, writer, editor, and columnist for more than 20 years, specializing in the primary metal and basic manufacturing industries. His work has covered a wide range of topics, including process technology, resource development, material selection, product design, workforce development, and industrial market strategies, among others. Currently, he specializes in subjects related to metal component and product design, development, and manufacturing — including castings, forgings, machined parts, and fabrications.
Brooks is a graduate of Kenyon College (B.A. English, Political Science) and Emory University (M.A. English.)