Calendar › Industrial production › 2026-10-16
Capacity Utilization 76.9% vs 76.5% Est — Highest Since 2023, Utilities Did the Lifting
Fundamentals · 2026-10-16
Capacity utilization 76.9% in September against a 76.5% consensus (TradingEconomics), up from an upwardly revised 76.4% (first published 76.3%) and the highest since December 2023, still 2.5 points below its 1972-2025 average of 79.4%. Industrial production +0.7% m/m against 0.4% expected, the largest rise since April, after a revised +0.1% in August (first published 0.0%); +2.2% y/y. Manufacturing +0.3%, in line, after a revised −0.2%. Utilities +3.5% (electric +3.7%), mining +0.2%. Motor vehicles and parts −3.0%; manufacturing ex motor vehicles +0.5%. Primary metals +1.6%, machinery +1.4%, electrical equipment +1.3%. Business equipment flat. Q3 IP +2.8% annualized, manufacturing just +0.7%; semiconductors +28.4% annualized in Q3. Factory utilization 75.9%, utilities 73.8%, mining 87.5%. Annual revision 24 November; next monthly release Tuesday 17 November.
What It Changes
- The headline beat came from the power grid, not the factory floor. Utilities rose 3.5% on a 12.4% weight, which by itself adds roughly 0.4 percentage points: about the whole gap between the 0.7% print and the 0.4% consensus. Manufacturing rose 0.3%, exactly as forecast.
- Utilization is the number that edges toward the inflation debate. At 76.9% it is the highest in nearly three years, and the primary and semifinished stage rose to 77.2%. But it is still 2.5 points below its long-run average, so the release shows tightening, not a capacity squeeze.
- It settles neither side of Thursday's split. Empire State said strong, Philly Fed new orders said weak. Factory output at 0.3%, with Q3 manufacturing at just 0.7% annualized, sits between them. It gives the hawks a hotter headline and the growth worriers a soft factory quarter.
- The AI build-out is visible inside the data. Semiconductor output rose at a 28.4% annual rate in Q3 and is up 19.9% on the year, and electric utilities are up 9.6% y/y. Strip out high-tech and motor vehicles, and factory output is up only 0.8% on the year.
Impact
- USD — Neutral — a headline beat that came from utilities and an in-line factory print gave the dollar nothing to trade.
- DXY unchanged from 09:14 to 09:20 ET, and −0.09% on the day at 13:20 ET.
- The 10-year yield was unchanged from 09:14 to 09:20 ET and was about 1bp higher by 09:25. On the day it is about 3bp higher after Thursday's close at 5.10% (US Treasury); the 2-year is little changed after closing at 4.77% (US Treasury).
- US Indices (ES / NQ / YM / RTY) — Neutral — the print did not move the indices; the selloff came later.
- From 09:14 to 09:20 ET: ES −0.04%, RTY −0.02%. By 13:20 ET the indices were sharply lower: ES −1.19%, NQ −2.30%, YM −0.63%, RTY −1.74% on the day. That fall began after the 09:30 cash open, and nothing in this release explains it.
- RTY is the index this release speaks to most. Factory output and business equipment are the small-cap cycle. Business equipment was flat and Q3 manufacturing grew at 0.7% annualized, which gives RTY no tailwind from the data.
- Gold (GC) — Neutral — a brief dip, then a recovery.
- GC −0.21% from 09:14 to 09:20 ET, at worst −0.31% at 09:21, and back near its 09:14 level by 09:35. It is +0.25% on the day.
Inside The Number
Capacity utilization rose to 76.9% in September against a 76.5% consensus, from an August rate revised up to 76.4%. That is the highest since December 2023 (FRED history of the Fed series). It remains 2.5 percentage points below its 1972-2025 average. Industrial production rose 0.7% against a 0.4% consensus (TradingEconomics), the largest monthly rise since April's 0.8%. August was revised up to +0.1% from 0.0%. On the year, IP is +2.2%, and in Q3 it rose at a 2.8% annual rate.
The composition is the story. Utilities rose 3.5%, with electric utilities up 3.7% and natural gas utilities up 2.1%. Utilities carry a 12.4% weight, so they contributed roughly 0.4 percentage points: almost all of the beat. In Q3, utilities output rose at a 14.8% annual rate, and electric utilities are up 9.6% on the year. The Fed's release does not say why. It could be a hot September, rising data-centre demand, or both.
Manufacturing was exactly as expected. Factory output rose 0.3%, matching the consensus, after a revised −0.2% in August. In Q3 manufacturing grew at just a 0.7% annual rate, after 5.6% in Q2. Durable manufacturing rose 0.1% and nondurables 0.4%. Within durables, primary metals rose 1.6%, machinery 1.4% and electrical equipment 1.3%, while motor vehicles and parts fell 3.0%, with vehicle assemblies down 5.4%. Excluding motor vehicles and parts, manufacturing rose 0.5%.
The high-tech line is the one compounding. The Fed's selected high-technology industries rose 1.5% in September and 21.6% annualized in Q3. Semiconductors and related electronic components rose 2.1% on the month and 28.4% annualized in Q3, and are up 19.9% on the year. Excluding high-tech and motor vehicles, manufacturing is up just 0.8% y/y. The AI build-out is lifting a narrow slice of US industry while the rest grows slowly.
Utilization is rising, but not evenly. The total rate's 0.5-point rise came mostly from utilities (up 2.3 points to 73.8%) and from the primary and semifinished stage (up 0.9 points to 77.2%). Manufacturing utilization rose just 0.1 point to 75.9%, 2.3 points below its average. Mining runs hot at 87.5%, 2.3 points above average. The finished goods stage was flat at 73.7%. Capacity itself is growing slowly: total capacity is up 1.2% on the year, manufacturing 1.0%, and utility capacity 3.1%.
For the inflation debate, this is tightening, not overheating. Slack in US industry is shrinking. The total rate has risen from 75.2% in January to 76.9%. But the usual pressure point is the low 80s, and the total rate is still 2.5 points below its 79.4% average. Set against this week's prices data (core CPI at 0.3% twice, PPI up 1.3%, import prices up 1.1%), the message is that the price pressure is not coming from factories running at capacity.
The Internals
Industrial production by industry and market group:
Series · Weight · Sep m/m · Aug m/m (revised) · Q3 annualized · y/y · Read
Total industrial production · 100.00 · +0.7% · +0.1% · +2.8% · +2.2% · Consensus +0.4%; largest rise since April
Manufacturing · 75.89 · +0.3% · −0.2% · +0.7% · +1.1% · In line with the 0.3% consensus
Durable manufacturing · 39.04 · +0.1% · −0.5% · +3.8% · +3.7% · Semiconductors carry it
Nondurable manufacturing · 35.34 · +0.4% · 0.0% · −1.6% · −1.1% · Printing and chemicals up
Mining · 11.71 · +0.2% · +0.5% · +5.0% · +2.8% · Oil and gas well drilling −1.5%
Utilities · 12.40 · +3.5% · +1.5% · +14.8% · +8.7% · About 0.4pp of the headline
Electric utilities · 10.81 · +3.7% · +1.7% · +14.2% · +9.6% · Fourth monthly rise in a row
Natural gas utilities · 1.59 · +2.1% · −0.4% · +19.0% · +3.1% · Volatile series
Consumer goods · 27.85 · +0.7% · 0.0% · +0.7% · −0.1% · Energy +3.5%, durables −1.5%
Business equipment · 9.26 · 0.0% · −0.1% · +6.6% · +6.7% · Transit −1.7% offset industrial +1.3%
Defense and space equipment · 1.66 · +0.4% · −1.3% · +6.3% · +6.7% · Recovered part of August's fall
Construction supplies · 6.18 · +1.0% · −0.7% · +3.1% · +1.6% · Rebound
Materials · 43.43 · +0.7% · +0.3% · +3.9% · +2.6% · Energy materials +1.6%
Manufacturing detail:
Industry · Weight · Sep m/m · Aug m/m (revised) · y/y · Read
Semiconductors and related components · 1.49 · +2.1% · +1.2% · +19.9% · Q3 +28.4% annualized
Selected high-technology industries · 2.15 · +1.5% · +1.1% · +17.5% · Q3 +21.6% annualized
Primary metals · 2.45 · +1.6% · −0.6% · +1.3% · Among the named gainers
Machinery · 5.50 · +1.4% · +0.3% · +6.9% · Strongest of the last six months
Electrical equipment and appliances · 2.31 · +1.3% · −0.2% · +5.4% · Named by the Fed among the gainers
Chemicals · 11.93 · +1.0% · +0.3% · −1.3% · Largest nondurable weight
Printing and support · 1.37 · +1.9% · −0.5% · −2.2% · Named by the Fed as a leader
Computer and electronic products · 4.98 · +0.1% · −0.2% · +9.5% · Flat month, strong year
Aerospace and other transportation · 4.31 · +0.5% · −1.2% · +4.4% · Partial rebound
Motor vehicles and parts · 5.80 · −3.0% · −0.4% · −0.8% · Vehicle assemblies −5.4%
Plastics and rubber · 3.56 · −0.9% · −0.7% · +0.7% · Second fall in a row
Paper · 2.18 · −1.1% · −0.1% · −3.2% · Fourth fall in a row
Manufacturing ex motor vehicles and parts · 70.09 · +0.5% · −0.2% · +1.3% · The cleaner factory read
Manufacturing ex high-tech and motor vehicles · 67.94 · +0.5% · −0.3% · +0.8% · Slow growth outside AI hardware
Capacity utilization, % of capacity:
Sector · Sep · Aug (revised) · Aug as first published · 1972-2025 average · Capacity growth y/y · Read
Total industry · 76.9 · 76.4 · 76.3 · 79.4 · +1.2% · Highest since Dec 2023; consensus 76.5
Manufacturing · 75.9 · 75.8 · 75.7 · 78.2 · +1.0% · 2.3 points below average
Mining · 87.5 · 87.4 · n/a · 85.2 · −0.1% · 2.3 points above average
Utilities · 73.8 · 71.5 · n/a · 84.0 · +3.1% · Up 2.3 points in a month
Crude processing · 84.0 · 84.0 · n/a · 84.5 · −0.1% · Near average
Primary and semifinished · 77.2 · 76.3 · n/a · 80.1 · +1.4% · Up 0.9 points
Finished goods · 73.7 · 73.7 · n/a · 76.6 · +1.3% · Flat; the slackest stage
Total utilization over the year, % of capacity (Fed, via FRED):
Month · Utilization
September 2025 · 76.0
December 2025 · 75.6
January 2026 · 75.2
April 2026 · 76.2
July 2026 · 76.4
August 2026 · 76.4
September 2026 · 76.9
Where The Output Came From
Utilities, by a distance. Electric utilities rose 3.7% for a fourth straight monthly gain, and natural gas utilities rose 2.1%. Utilities output is up 8.7% on the year and grew at a 14.8% annual rate in Q3. Utility capacity is growing at 3.1% a year, the fastest of any sector, and utilization still jumped 2.3 points. The Fed gives no reason for the September jump.
Factories: metals and machinery up, autos down. The Fed named three durable industries with gains of 1% or more: primary metals, machinery, and electrical equipment, appliances and components. Against them, motor vehicles and parts fell 3.0%, with vehicle assemblies down 5.4%, after a 0.4% fall in August. Excluding autos, factory output rose 0.5%, a firmer read than the 0.3% headline.
Semiconductors keep compounding. At 1.49% of IP, semiconductor output is small, but it rose 2.1% in September, 28.4% annualized in Q3 and 19.9% over the year. The Fed singled it out: durable manufacturing rose at a 3.8% annual rate in Q3, "driven in part by" semiconductors. Computer and electronic products overall were flat on the month and up 9.5% y/y.
Business equipment stalled. After rising 1.0% in July and slipping 0.1% in August, business equipment was flat in September. Industrial and other equipment rose 1.3%, but transit equipment fell 1.7% and information processing 0.9%. On the year business equipment is still up 6.7%, so this is a pause, not a reversal, but it is one month of no capex lift from the factory side.
Consumer goods rose on energy. Consumer goods rose 0.7%, entirely from nondurables (+1.2%), and within that consumer energy products rose 3.5%. Durable consumer goods fell 1.5%, led by automotive products at −2.8%. Non-energy nondurable consumer goods are down 1.3% on the year.
Mining is running hot and steady. Output rose 0.2%, and mining utilization is 87.5%, above its long-run average. Oil and gas well drilling fell 1.5% on the month but is up 7.2% on the year.
Against This Morning's Open
- The Open called this "the session's fulcrum." The Open set it up as a test: a factory miss would back Thursday's growth-worry trade in bonds and gold, and a strong print would add to the inflation case import prices had just made.
- It resolved as neither. Manufacturing printed exactly the 0.3% consensus. The headline beat and the utilization high came from utilities, which neither side of that test was about.
- And the market treated it that way. ES moved −0.04% and the 10-year was unchanged in the six minutes after 09:15. The larger moves of the day came after the cash open.
What This Sets Up
- Next release: Tuesday 17 November at 09:15 ET, covering October, after the 27-28 October FOMC.
- Then the annual revision on 24 November. The Fed will rebase the indexes to 2022, add new Census benchmarks for 2023 and 2024, and revise capacity. The utilization history in this brief can shift.
- Whether utilities give back September. A 3.5% jump in one month often partly reverses. If it does, the headline could fall even with factories steady.
- Whether manufacturing ex autos holds 0.5%. That is the read on factories after Philly Fed's new-orders slump. A second month near 0.5% would weaken the slowdown case.
- Whether total utilization keeps climbing. It is already at its highest since December 2023. A move toward the 79.4% long-run average would make capacity part of the Fed's inflation debate.
What Is This?
- What it is: The Federal Reserve Board's G.17 release measures the real output of US manufacturing, mining, and electric and gas utilities (industrial production), and how much of the industrial sector's capacity is in use (capacity utilization). IP is built from 297 individual series, using physical output where possible (tons of steel, barrels of oil) and production-worker hours otherwise. It is indexed to 2017 = 100 and seasonally adjusted. Capacity utilization is output divided by an estimate of sustainable maximum output. It is published around the middle of each month at 09:15 ET.
- Why it matters: It is the most direct monthly read on US factory output, and utilization is a gauge of slack: when it runs high, producers have more pricing power and bottlenecks push prices up. With the funds rate at 3.75-4.00% (Fed) after the September hike, an FOMC on 27-28 October, and prices data running hot this week, the question is whether industry is short of capacity or still has room. This release says it still has room, but less than a year ago.
- How to read it: Read manufacturing, not the headline. Utilities swing with the weather and can move the headline by several tenths in a month, as they did in September. Manufacturing ex motor vehicles strips out the most volatile factory line. For utilization, compare with the 79.4% long-run average: the low 80s have historically signalled pressure, and the mid-70s signal slack. The last three months are revised every release, and the annual revision (24 November this year) can change the whole history.
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_For informational purposes only. Not investment advice._