U.S. industrial production rose 0.7% in September 2026, beating the 0.4% consensus forecast, the Federal Reserve reported October 16. Utilities output jumped 3.5% and accounted for much of the gain, while manufacturing rose 0.3%. Capacity utilization climbed to 76.9%, still 2.5 percentage points below its long-run average.
Key Takeaways
- Total industrial output stood at 104.0% of its 2017 average in September, 2.2% higher than in September 2025.
- Industrial production grew at a 2.8% annual rate in the third quarter, with August’s reading revised up to a 0.1% gain from flat.
- Utilities output rose at a 14.8% annual rate in the third quarter and is up 8.7% year over year.
- Semiconductor and related electronic component output rose at a 28.4% annual rate in the third quarter.
- Motor vehicle and parts production fell 3.0% in September, offsetting gains in machinery, primary metals and electrical equipment.
- The Federal Reserve will release its annual revision of the industrial production data on November 24, 2026, moving the base year to 2022.
The Headline Beat Came Mostly From Utilities
The September industrial production report looks stronger at the top than underneath. The total index rose 0.7%, its largest monthly gain since April, when output rose 0.8%. But the three industry groups grew at very different rates.
| Industry Group | September Change | Q3 Annualized Rate | Year Over Year |
|---|---|---|---|
| Total industrial production | +0.7% | +2.8% | +2.2% |
| Manufacturing | +0.3% | +0.7% | +1.1% |
| Mining | +0.2% | +5.0% | +2.8% |
| Utilities | +3.5% | +14.8% | +8.7% |
Utilities output rose 3.5%, with gains at both electric and natural gas utilities. Utilities make up a much smaller share of the industrial base than manufacturing, yet the jump was large enough to lift the headline figure well above forecasts. Manufacturing, which most business owners read as the measure of factory demand, rose 0.3% and grew at only a 0.7% annual rate for the quarter.
For businesses, the distinction matters. A 0.7% headline gain points to a broad industrial upswing. The manufacturing figure points to steady but modest growth, which is closer to what most suppliers, contract manufacturers and industrial distributors will see in their order books.
Semiconductors Drive Durable Goods While Auto Output Falls
Within manufacturing, the September data shows a split between technology-related production and traditional heavy industry. Durable manufacturing edged up 0.1% in September. Primary metals, machinery, and electrical equipment, appliances and components each rose 1% or more. Motor vehicle and parts output fell 3.0%, which held the durable goods total nearly flat.
The quarterly figures make the pattern clearer. Durable manufacturing grew at a 3.8% annual rate in the third quarter, driven partly by a 28.4% annualized gain in semiconductors and related electronic components. Nondurable manufacturing fell at a 1.6% annual rate over the same period, even though it rose 0.4% in September on gains in printing and chemicals.
That concentration is the trend to watch. Much of the growth in U.S. factory output is coming from chip and electronics production tied to AI infrastructure spending. Businesses in auto supply chains or nondurable consumer goods are working in a much softer environment than the headline suggests.
Business Equipment Output Stalls After a Strong First Half
Every major market group gained in September except business equipment, which was unchanged. The breakdown by market group:
- Consumer goods rose 0.7%, as nondurable goods offset a decline in durable consumer goods.
- Construction supplies rose 1.0%, recovering from a 0.7% decline in August.
- Business supplies rose 0.9%, and materials output rose 0.7%.
- Business equipment was flat for a second month, after a 0.1% dip in August.
Business equipment output is still 6.7% above its September 2025 level, the largest year-over-year gain of any market group. Two flat months after gains of 2.0% in April and 1.0% in July suggest the capital spending push may be leveling off. Combined with the 7.40% average 30-year mortgage rate and Treasury yields above 5%, financing costs are a likely reason for the pause.
Capacity Utilization Shows Room Before Price Pressure Builds
Total capacity utilization rose to 76.9% in September from 76.4% in August, 2.5 percentage points below its 1972–2025 average of 79.4%. Manufacturing utilization edged up 0.1 point to 75.9%, 2.3 points below its long-run average.
Utilization is a rough gauge of how hard the industrial base is running. Rates well below average usually mean factories can take on more orders without straining capacity or raising prices. Mining is the exception: its operating rate of 87.5% is 2.3 points above its long-run average, a sign of tighter conditions in fuel and raw material extraction.
The utilization data adds context to cost pressures building elsewhere. The Producer Price Index for final demand rose 1.3% in September, largely on energy. Factory floors are not running hot enough to explain those prices on their own, which points back to input costs, especially fuel, as the main source of inflation pressure for manufacturers. That matches survey data from earlier in the fall, when the September flash PMI showed input cost inflation at its highest level since 2022 even as output expanded.
November Revision Could Reshape the Picture
The September figures are preliminary. The Federal Reserve will publish its annual revision to industrial production and capacity utilization on November 24, 2026. The revision will move the index base year from 2017 to 2022 and incorporate Census Bureau manufacturing benchmarks for 2023 and 2024. It may also change estimation methods for some industries, with revisions reaching back to 1972.
Businesses that use industrial production data for planning, pricing or lending decisions should expect the historical series to look different after that date. The next monthly report, covering October, will be the first to reflect the new base year.
FAQs
How Much Did Industrial Production Rise in September 2026?
Industrial production rose 0.7% in September 2026, compared with a 0.4% consensus forecast. Output was 2.2% higher than a year earlier.
What Drove the September Industrial Production Increase?
Utilities output rose 3.5% and drove much of the gain. Manufacturing rose 0.3% and mining rose 0.2%.
What Was Capacity Utilization in September 2026?
Total capacity utilization rose to 76.9%, which is 2.5 percentage points below its 1972–2025 average. Manufacturing utilization was 75.9%.
Which Industries Grew Fastest in the Third Quarter?
Semiconductors and related electronic components rose at a 28.4% annual rate. Utilities grew at a 14.8% annual rate, and mining at 5.0%.
When Is the Next Industrial Production Revision?
The Federal Reserve will release its annual revision on November 24, 2026, updating the base year to 2022 and incorporating new manufacturing benchmark data.
