MTI Releases 1st Quarter Economic and Heat Treat Forecast Report

The Metal Treating Institute (MTI) Forecast Report for Q1 2025 was recently released, and followed up by ITR Economics presenting the report via a live webcast last week. The report presents an optimistic outlook for heat treat sales and several key industrial sectors. Despite ongoing economic challenges such as inflation, high interest rates, and supply chain uncertainties, several industries are poised for growth. 

CLICK HERE to view full report.

Here is a summary of key projections:

Economic Overview

• Retail Sales Growth: Consumers will benefit from rising incomes and adjusted savings balances, leading to stronger retail sales, especially in the latter half of 2025.
• Interest Rates & Inflation: The Federal Reserve has adopted a more accommodative monetary policy, but long-term borrowing costs for businesses will likely remain elevated. Inflation is expected to rise moderately in late 2025.
• Labor Market & Tariffs: A tight labor market will continue, putting upward pressure on wages. The evolving state of tariffs could impact price growth and supply chain strategies.

Heat Treating Industry Outlook

• MTI Sales Growth: The industry is in an accelerating growth phase, with projected annual sales growth of 4.0% in 2025, 3.4% in 2026, and 0.5% in 2027. This reflects strong corporate profits and industrial activity, although some market segments face near-term challenges.
• Macroeconomic Drivers: Corporate profitability, machinery utilization rates, and capital investments will support continued expansion. However, the impact of higher interest rates will persist.

Key Industry Forecasts

• Industrial Production: Expected to rise 1.4% in 2025, 1.5% in 2026, and 1.3% in 2027 due to nearshoring investments and increasing domestic capacity.
• Capital Goods Orders: Projected 2.1% growth in 2025, peaking at 5.0% in 2026, before plateauing in 2027.
• Construction Machinery: A -2.4% decline in 2025, followed by 5.7% growth in 2026. The downturn is due to weak nonresidential construction and high interest rates.
• Light Vehicle Production: Expected to grow modestly, with 0.9% in 2025 and 3.7% in 2026, driven by higher consumer incomes but constrained by financing costs.
• Heavy-Duty Truck Production: A mild decline in early 2025, but a 2.4% increase by year-end, with continued growth through 2027.
• Oil & Gas Extraction: Moderate expansion with 2.2% growth in 2025 and 4.2% in 2026, supported by steady industrial demand.
• Medical Equipment & Supplies: Recovery from recession is expected, with 0.7% growth in 2025 and 0.5% in 2026, as high borrowing costs slow investment.
• Civilian Aircraft Equipment: A strong 5.7% growth forecast for 2025, despite temporary disruptions in production.
• Computers & Electronics: Driven by AI and data center expansion, new orders will grow 1.3% in 2025 and 1.8% in 2026.
• Farm Machinery: Shipments will decline -2.6% in 2025 due to weak farmer incomes, but recovery is expected in 2026 and beyond.

Strategic Business Takeaways

• Efficiency & Cost Control: Rising prices and supply chain uncertainties mean businesses must focus on cost-cutting and operational efficiency.
• Capital Investments: Companies should consider investing in automation and workforce development ahead of expected growth cycles.
• Supply Chain Flexibility: With potential tariff changes, businesses should build contingency plans for sourcing and distribution.
• Optimistic Outlook: While some industries face short-term declines, overall economic momentum is expected to pick up in the second half of the decade.

The heat treating industry and related sectors are positioned for steady growth through 2026, with a plateau expected in 2027. Businesses should prepare for economic expansion while mitigating risks associated with inflation, interest rates, and supply chain disruptions.

Take time to share this report with your key management to keep them tuned into the future projections for the various industry sectors.

MTI invests $50,000 annually in our forecasting program to ensure we deliver the best business intelligence to our members for no charge.  Our forecasting partner, ITR Economics has a 96% accuracy rating up to 4-quarters out.  Stay connected to these quarterly reports and webcasts to minimize the uncertainty of the future for you and your team.