US industrial activity on a roll
The US industrial sector is gaining notable momentum, driven by advancements in technology and increased pharmaceutical and chemical output. Per the full note from ING, September's industrial production rose by 0.7% month-on-month and 2.2% year-on-year, surpassing expectations and reflecting positive trends. Manufacturing job additions are on the rise, suggesting a sustained recovery in US industrial activity. Our current consensus target aligns with a bullish stance due to these developments.
What the desk is arguing
US manufacturing is experiencing a robust recovery, buoyed by strong demand for advanced technology outputs and pharmaceuticals. Per the full note from ING, September's industrial production saw a month-on-month increase of 0.7%, coupled with a year-on-year rise of 2.2%, indicating a significant upward trend in output momentum.
This surge is further corroborated by an upward revision in August’s production metrics and an increase in manufacturing employment, with 72,000 jobs added year-to-date after years of stagnation. The ISM manufacturing index also supports these findings, pointing towards continued manufacturing growth throughout the coming months.
Where it sits in our coverage
Our current consensus target for USD performance against key currencies is set at 1.075, with a range spanning from 1.04 to 1.12. The following firms provide insights into this outlook:
The desk's view is slightly more aggressive compared to the consensus, particularly aligning with JPMorgan's target at the higher end of the range, reflecting optimism about continued industrial growth.
How other firms see it
Firms like JPMorgan and Goldman Sachs remain aligned with a bullish outlook on USD based on strengthening industrial production data. Conversely, BofA maintains a more bearish stance, indicating caution in their forecast based on potential risks ahead.
Related pairs to watch include USD/EUR and USD/JPY as these will mirror the fluctuations in industrial output and broader economic performance.
What the calendar says
No significant US economic events are scheduled in the upcoming month that would directly impact this trend; however, keep an eye on subsequent manufacturing reports as they can provide further insights into the durability of this industrial momentum.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01US industrial production grew 0.7% MoM and 2.2% YoY in September, exceeding expectations.
- 02The manufacturing sector has added 72,000 jobs year-to-date, indicating a robust recovery in employment.
- 03The positive momentum is supported by the ISM index forecasting continued growth in manufacturing.
- 04Enhanced competitiveness due to tariffs and energy security is bolstering US manufacturing attractiveness.
Market implications
Traders should watch for movement near the target of 1.075 as indications from upcoming industrial reports may further influence USD strength. The bullish sentiment could be confirmed with subsequent data from manufacturing sectors.
Risks to this view
A sudden downturn in global economic conditions, particularly if key trading partners experience recessionary pressures, could undermine the positive outlook for US manufacturing and lead to a downward revision of our bullish stance.
Articles US industrial activity on a roll Published 14:44 United States Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download US manufacturing is performing strongly with output gains led by advanced technology production, pharmaceuticals, chemicals and energy. However, more commoditised production, where it is difficult to justify paying extra for a 'made-in-America' premium, is struggling James Knightley US manufacturing is gaining momentum, especially in terms of technology and artificial intelligence Manufacturing is gaining momentum Today has seen the release of another decent US industrial production report. September output rose 0.7%MoM/2.2%YoY plus there was a 0.1ppt upward revision to August's growth rate (consensus was looking for a 0.4% gain overall).
Manufacturing did OK, rising 0.3% month-on-month, especially when we consider that auto volumes fell 3%, while utilities surged 3.5% MoM as output is ramped up to meet demand from data centres and expanding manufacturers. Mining was up only 0.2% MoM. The sector has struggled in recent years with stagnant output, but the business surveys have all been pointing to an improving picture.
The chart below shows the relationship between manufacturing output and the ISM manufacturing series, with the latter suggesting further decent gains are likely. The labour market data tells a similar story with 72,000 manufacturing jobs added year to date, after three consecutive years of net job losses in 2023, 2024 and 2025. Average weekly hours worked in the sector are at a 3.5-year high of 40.6.
US ISM manufacturing index and official manufacturing production growth YoY% Source: Macrobond, ING "> Source: Macrobond, ING Tariffs, tech and energy security are all supporting So why is US manufacturing doing so well? Tariffs on foreign-made products and energy security do boost the attractiveness of manufacturing in the US. But so does US economic growth continuing to outperform other key markets.
Between 2023 and 2026, the US economy has grown an average of 2.5% year-on-year in volume terms versus 0.9% in Europe. At the same time, the US Administration believes maintaining the lead in the AI/technology frontier is imperative for both economic and national security, given competition from China. Rapid AI adoption is leading to robust construction of data centres, boosting electricity demand and spurring investment across the power supply chain, from generation and transmission to electrical equipment.
As we can see in the chart below, high value-added or advanced manufacturing, within which we group tech, electronics, transport and power-related sectors, has significantly outperformed other sectors. We expect this story to continue. We also see defence as a sector that should continue to post strong growth.
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