Manufacturers are reporting increased raw material costs as the top business challenge facing them, jumping 25.6 percentage points from 57.5% in the first quarter to 83.1% in the second quarter, according to the National Association of Manufacturers’ Q2 Manufacturers’ Outlook Survey. This shift comes as the conflict in the Middle East puts new pressure on manufacturers’ supply chains, with 72% of respondents saying their company is facing rising energy input costs as a result of the conflict. The survey also shows manufacturers’ optimism remained relatively steady, dipping to 74.2% in the second quarter of 2026, a decrease from 75.3% in the first quarter but in line with the historical average.
These results underscore the need to continue advancing American energy dominance policies that maintain a high level of domestic production—especially as a majority of respondents (53.3%) point to energy inputs such as diesel and natural gas, heating oil and kerosene as among the most critical to their operations over the next 12 months. A similar share (54.3%) highlighted industrial machinery as critical to their operations—reinforcing the ongoing need for policies like the NAM’s U.S. Manufacturing Investment Accelerator Program that support domestic buildout and investment.
“While we continue to see a lot of new investment announcements here at home, there are still headwinds keeping us from reaching our full potential,” said NAM President and CEO Jay Timmons. “Manufacturers continue to press for policies that move the needle on the priorities that matter most to manufacturing certainty, growth and investment.”
Trade continued to be top of mind for manufacturers with trade uncertainties reported as the second top business challenge, at 71.8%, up slightly from 70.6% in Q1—and ranking as number one for companies with more than 500 employees—illustrating the need to preserve and improve the United States–Mexico–Canada Agreement while continuing to lock in trade deals.
Rising healthcare costs ranked as the third top business challenge, with 76.8% of respondents reporting making business changes, such as switching insurance providers or reducing benefits or pay, as a result of increased healthcare spending. To help address these pressures, the NAM recently released “Prescription for a Healthy Workforce,” a roadmap detailing manufacturers’ policy priorities for lowering healthcare and insurance costs, with recommendations policymakers can take to reduce healthcare costs and protect manufacturers’ ability to offer vital healthcare benefits.
“While optimism edged down slightly, it remained consistent with the historical average,” said NAM Chief Economist Victoria Bloom. “Consistent with this minor dip in outlook, manufacturers expect growth to slow somewhat across a majority of indices over the next 12 months. In Q2, sales and production are projected to rise 3.3% and 3.0%, respectively, over the next 12 months compared to the 3.8% and 3.5% growth forecasted in Q1. Meanwhile, costs are anticipated to rise at a much faster pace than projected in the prior quarter. Raw material and other input costs are expected to increase 5.8%, up from 4.1% in Q1 and consistent with the top business challenge facing manufacturers this quarter.”