US factory output falls 0.3% two days after the Fed's first hike since 2023
The Federal Reserve said Friday, September 18, 2026 that August industrial production was unchanged, with manufacturing down 0.3%, two days after its first rate increase since 2023.
Shops spent. Factories did not. Manufacturing output fell 0.3% in August after seven consecutive monthly increases, the Federal Reserve said Friday at 9:15 a.m. Eastern, two days after the Federal Open Market Committee raised the federal-funds target by 1/4 percentage point to 3.75% to 4%, its first increase since 2023. Total industrial production was unchanged at 103.1 (2017=100), 1.4% above a year earlier and short of the 0.3% monthly increase economists had expected. The $30.5 billion industrial-sector fund XLI was little changed shortly after the cash open, up 0.1% at $169.18 as of 9:49 a.m. Eastern.
Durable manufacturing declined 0.5%, the Fed said, with broad-based declines across categories; nondurables were unchanged. Factories used 75.7% of capacity, down 0.3 percentage point and 2.5 percentage points below their 1972–2025 average. That is spare capacity, not a bottleneck. It is the industrial backdrop under a median year-end 2026 funds-rate projection of 4.1%.
The August factory report arrived after that vote. On Wednesday the Census Bureau said retail and food-services sales rose 1.2% in August to $773.9 billion, above the 0.8% gain economists had forecast, after a revised 0.5% decline in July. On Tuesday the New York Fed's Empire State general business-conditions index fell 13 points but stayed positive at 7.6.
XLI was already down sharply over the past month.
XLI dropped 7.4% over the past month; the S&P 500 fell 1.2%
- −7.4%
- −1.2%
Frequently asked
Did factory output actually shrink?
Manufacturing output fell 0.3% in August after seven straight monthly increases, while total industrial production was unchanged.
Where did the weakness come from?
Durable goods manufacturing fell 0.5% with broad-based declines across categories, while nondurables were unchanged.
Are factories running up against capacity limits?
No: they used 75.7% of capacity, 2.5 percentage points below their long-run average, which is spare capacity rather than a bottleneck.
How did industrial stocks react?
The industrial-sector fund XLI was little changed just after the open, up 0.1%, though it had already lost 7.4% over the past month against a 1.2% decline for the S&P 500.