Manufacturers/End Users
September 3, 2026
Defense and data centers lift manufacturing, Fed reports
Written by David Schollaert
Manufacturing picked up across 10 of the 12 Federal Reserve districts. It was again one of the stronger sectors in the Fed’s Sept. 2 Beige Book report.
The steel industry has noted continued demand from defense work and data-center orders. Both were cited by the Fed as drivers across several regions. Cleveland reported robust manufacturing demand tied to the two. The New York district saw particular strength in manufacturing, and Dallas said growth picked up in the sector.
Input costs stayed elevated, the report said, and price pressures were notably high in manufacturing and construction across multiple districts. Energy, transportation, and raw materials all rose, with metals and petrochemicals singled out.
The Cleveland district reported robust non-labor costs for a 10th straight period.
No surprise, tariff pressure also continued, with retail and manufacturing contacts noting effects in multiple districts. Firms also said they couldn’t fully pass those increases through. Customer price sensitivity was limiting recovery of higher input costs, squeezing margins for manufacturers and downstream metal users.
Automotive demand was subdued. Downbeat consumer confidence, high fuel prices, and rising financing costs all weighed on sales. The New York district also flagged emerging supply-chain strains in the tech and defense sectors.
Construction activity was split by segment. Residential declined while nonresidential rose, again concentrated in data-center projects. Skilled trades and technical workers remained hard to find, and the largest wage gains were in construction and manufacturing.
Softer consumer spending and heightened uncertainty were flagged by several districts. Despite this, the general outlook for the coming months remained positive.
