U.S. Industrial Production Rises 0.7% in September as Factory Output Recovers

U.S. industrial production rose 0.7% in September, the Federal Reserve reported Friday, as a sharp increase in utilities output helped lift the broader industrial sector and factories returned to growth. The increase followed a revised 0.1% gain in August and was larger than the improvement in manufacturing alone, which advanced 0.3% after contracting the previous month.

The September figures show a recovery in physical output, but the headline masks an uneven performance across industries. Utilities production jumped 3.5%, mining edged up 0.2%, and motor vehicles and parts fell 3.0% despite an overall rise in factory activity. Industrial production includes manufacturing, mining, and electric and gas utilities, so its growth rate is not interchangeable with the narrower factory-output measure.

The Federal Reserve’s September industrial production report, released October 16, put the industrial output index at 104.0, measured against a 2017 baseline of 100. That placed production 2.2% above its level a year earlier. The central bank also reported a 2.8% annualized increase in industrial output for the third quarter, a separate measure of growth over the July-to-September period rather than a repeat of September’s monthly gain.

Utilities provide a strong lift to the industrial headline

Utility output delivered the biggest percentage increase among the three major industrial sectors in September. The 3.5% monthly rise followed a 1.5% increase in August, according to the Fed’s seasonally adjusted series. Both electric utilities and natural gas utilities contributed to September’s advance. The release did not assign the jump to any single cause, so the data alone do not establish whether weather, changes in demand, or other factors were primarily responsible.

Mining production grew a more modest 0.2%, following a revised 0.5% gain in August. Over the third quarter as a whole, mining output expanded at a 5.0% annual rate, while utility output grew at a 14.8% annual rate. Those quarterly rates underscore why the combined industrial index can show stronger momentum than manufacturing even when factory production is recovering. The weights and growth patterns of the three sectors differ, and the headline number represents their aggregate output rather than a simple average of their percentage changes.

The broader measure also drew support from different categories of industrial demand. Production of consumer goods increased 0.7%, with nondurable goods accounting for the improvement while durable consumer goods declined. Output of construction supplies advanced 1.0% and business supplies rose 0.9%. Business equipment production was unchanged, a reminder that stronger total industrial activity did not translate into growth for every major market group.

Manufacturing rebounds, but auto production falls

Factory output increased 0.3% in September after a revised 0.2% decline in August. That put factory output back in positive territory, although its pace remained well below the gain in overall industrial production. The manufacturing output index stood at 98.4 in September and was 1.1% above its level a year earlier, compared with a 2.2% annual gain for total industrial production.

Performance within manufacturing was split between relatively small gains in durable goods and stronger improvement in nondurables. Durable manufacturing output edged up 0.1%. The Fed reported gains of at least 1% in primary metals, machinery, and electrical equipment, appliances, and components. That positive movement was partly offset by a 3.0% decline in production of motor vehicles and parts, limiting the advance in durable goods manufacturing.

Nondurable manufacturing rose 0.4%, led by increases in printing and related support activities and in chemicals. The separation between durable and nondurable output shows why the recovery should not be described as a uniform manufacturing upswing. The strongest monthly improvement was not in all the capital- and consumer-durable sectors at once; instead, advances in several industries were sufficient to lift manufacturing despite the automobile-sector decline.

The quarterly figures point to a more uneven manufacturing picture than the monthly headline suggests. Factory output rose at an annual rate of just 0.7% during the quarter, much less than the 2.8% pace for overall industrial production. Durable manufacturing grew at a 3.8% annual rate, supported in part by higher production of semiconductors and related electronic components. Nondurable manufacturing, by contrast, fell at a 1.6% annual rate. The stronger performance of durables during the quarter therefore coexisted with an outright decline in nondurables.

Capacity use remains below normal as benchmark revision approaches

Industrial capacity utilization increased to 76.9% in September from 76.4% in August. Even after that improvement, factories, mines, and utilities together were operating 2.5 percentage points below their 1972-to-2025 average of 79.4%. Capacity utilization compares actual production with an estimate of sustainable productive capacity, offering a different perspective from changes in output alone. An industry can increase production and still have considerable unused capacity.

Manufacturing capacity utilization was 75.9%, up 0.1 percentage point from August and 2.3 points below its own long-run average. Mining operated at 87.5% of capacity, above its historical average, while utility capacity utilization rose to 73.8% and remained well below its long-run norm. The contrast shows that an increase in production does not necessarily mean operating conditions are equally tight across the industrial economy.

There was also a change to the recent data. The Fed revised August’s overall industrial production reading to a 0.1% gain from an initially reported flat result, and the manufacturing decline was revised to 0.2% from 0.3%. September’s figures remain preliminary. Those revisions matter when comparing monthly rates because the apparent size and timing of a rebound can change as additional source information is incorporated.

The Fed has scheduled an annual revision of its industrial production and capacity utilization data for November 24. The update will shift the index reference year from 2017 to 2022 and incorporate new manufacturing benchmark data from the Census Bureau, alongside revisions to industry indicators and seasonal factors. The next monthly industrial production release is scheduled for November 17; together, the releases will offer a firmer basis for assessing whether September’s increase marks sustained factory momentum or mainly a stronger month for the wider industrial sector.