U.S. Factory Output Slips; Leading Index Signals Greater Uncertainty — Evening Brief – 09.18.26
U.S. industrial activity lost momentum in August as manufacturing output declined and a key forward-looking index turned negative, adding to evidence that the economy is expanding unevenly amid elevated borrowing costs and cautious consumers.
Industrial production was unchanged from July, missing the 0.3% consensus forecast and slowing from the prior month’s unrevised 0.2% increase, according to data released Friday by the Federal Reserve.
Manufacturing production, the largest component of the report, fell 0.3% after increasing 0.2% in July. Economists had expected another 0.3% gain.
Mining output edged up 0.1%, matching July’s increase. Utilities production rose 1.8% following a 0.5% advance, offsetting the manufacturing decline and preventing total industrial production from contracting.
Capacity utilization held at 76.3%, slightly below the 76.4% consensus estimate. The operating rate remained 3.1 percentage points below its 1972-2025 average, indicating that factories, mines and utilities continue to have considerable unused capacity.
Separately, The Conference Board’s Leading Economic Index fell 0.1% to 99.5 in August, missing expectations for a 0.1% increase and reversing July’s 0.2% gain. It was the index’s first monthly decline since March.
The LEI declined 0.1% over the six months through August, an improvement from its 0.6% contraction during the previous six-month period. However, the latest reversal suggests the outlook has become less certain, said Justyna Zabinska-La Monica, senior manager of business cycle indicators at The Conference Board.
Four of the index’s 10 components declined. Consumer expectations remained a significant drag, while building permits fell across both single-family and multifamily categories and in nearly every region.
The Coincident Economic Index, which measures current conditions, edged up to 114.9 from 114.8. The Lagging Economic Index rose to 120.6 from 120.4.
The Conference Board expects real gross domestic product to grow 1.9% in 2026. It lowered its 2027 forecast to 1.8% from 1.9%, pointing toward continued expansion at a slower pace.