U.S. factories rebounded in September, with American chipmakers posting some of the strongest growth seen in years, according to Federal Reserve data released Friday.
Manufacturing output climbed 0.3 percent last month, reversing a revised 0.2 percent decline in August, and sits 1.1 percent above where it was a year ago. The August drop, it turns out, was smaller than first reported — 0.2 percent instead of the initially estimated 0.3 percent.
Strip out motor vehicles, and the picture looks even stronger: manufacturing output excluding autos and parts rose 0.5 percent in September. Exclude autos and select high-tech industries too, and output still rose 0.5 percent, meaning the gains were broad-based, not confined to one or two sectors.
Machinery production rose 1.4 percent for the month and is up 6.9 percent over the year. Primary metals output climbed 1.6 percent. Fabricated metal products rose 0.6 percent. Electrical equipment, appliances and components jumped 1.3 percent and are up 5.4 percent year-over-year.
Chips Lead the Charge
Semiconductor and related electronic component production surged 2.1 percent in September alone and is now running 19.9 percent above a year ago. For the third quarter, chip output expanded at a staggering 28.4 percent annual rate. The broader computer and electronic products industry produced 9.5 percent more than it did a year earlier.
Durable goods manufacturing grew at a 3.8 percent annual rate for the quarter and sits 3.7 percent above year-ago levels.
Detroit’s Problem
Not every sector is sharing in the rebound. Motor vehicle and parts production fell 3.0 percent in September — the third straight monthly decline. Total manufacturing growth slowed to a 0.7 percent annual rate for the quarter, down sharply from 5.6 percent in the second quarter.
High gasoline prices may be squeezing auto demand. New vehicle prices are up just 0.4 percent so far this year and 0.6 percent compared with last September — well behind the broader rise in consumer prices, according to the Labor Department’s inflation report released Wednesday. Retail sales at auto and parts dealers rose just 0.2 percent in September, essentially flat after accounting for prices, and are up only 1.7 percent for the year — sluggish by any measure.
New York and Pennsylvania Confirm the Trend
Regional data released Thursday backed up the national numbers. The New York Fed’s Empire State Manufacturing Survey showed its general business conditions index jumping to 25.5 from 7.6 in September — the highest reading since December 2021. New orders surged, with that index hitting 23.2, and shipments climbed to 13.1. Employment grew modestly and manufacturers added hours.
The Philadelphia Fed’s manufacturing survey also showed continued expansion, though growth cooled from last month’s pace. Its general activity index came in at 20.9, down from September’s 37.8. New orders, shipments and employment all stayed positive.
Manufacturers in the Philadelphia survey are bullish on next year: more than 52 percent plan to increase capital spending in 2027, and not a single respondent expects to cut back. Half plan to spend more on equipment outside of computers.
Both surveys flagged persistent inflation pressure. New York manufacturers reported sharp increases in input costs and selling prices, while Philadelphia’s prices-received index hit its highest level since May 2025. Manufacturers in both regions expect business conditions to keep improving over the next six months.
