Data Centres Are Jumping the Factory Queue. Everyone Else Is Waiting Longer

American manufacturing is having a better autumn than most of the economy. The trouble is that the growth is concentrated. A handful of customer types, chiefly data centre developers, power generators and defence contractors, are taking a rising share of the equipment, metals and skilled labour that every other plant also needs. For a factory that makes packaging, food, consumer goods or components for the housing market, the boom is showing up less as new orders and more as longer quotes, higher prices and a thinner pool of electricians.

Manufacturing Is Leading, but Only in Certain Lanes

The Federal Reserve's October 2026 Beige Book, based on contacts gathered through early October, put manufacturing at the front of an otherwise subdued economy. Robust, broad-based manufacturing growth led the Dallas District, six other Districts reported modest to moderate growth from their manufacturing firms, and the remaining five noted little or no growth. Outside manufacturing, the report said, other sectors showed little growth overall.

The district reports are specific about where that demand comes from. The Cleveland Fed's contacts said momentum was concentrated in data centre buildouts, power generation, and defence and aerospace. Philadelphia contacts said manufacturing growth continues to be driven primarily by data centres, AI and defence-related activity. In the Kansas City District, durable goods makers pointed to military contracts and the data centre buildout as not only strong but as crowding out other production, and the same report noted that the buildout had put pressure on the labour market.

The official output data shows the same split. The Fed's industrial production release for September recorded gains of 1% or more in primary metals, machinery, and electrical equipment, appliances and components, while output of motor vehicles and parts fell 3.0%. Manufacturing output as a whole rose only 0.3% in the month and 1.1% on a year earlier, and manufacturing capacity utilisation sat at 75.9%, 2.3 percentage points below its 1972 to 2025 average. Plants are not short of floor space. They are short of the things the priority customers are buying first.

The Queue Forms at the Supplier and in the Trades

The clearest example is electrical equipment. A Chicago District equipment distributor told the Fed that technology companies had tried to buy all the available electrical equipment for their data centre developments, and that suppliers had pushed back because of commitments to other projects. Chicago contacts also reported that megaprojects were crowding out capacity for other projects, along with longer lead times for some metals such as copper alloys and difficulty sourcing steel and aluminium components.

Grid equipment shows how long that queue can get. Wood Mackenzie data reported by Reuters in July put lead times for generator step-up transformers above 160 weeks by the first quarter of 2026, against a 2024 average of 143 weeks, while high-voltage circuit breakers climbed to 125 weeks in the second half of 2025 from 77 weeks in 2023. The firm projected that data centres' share of the electrical equipment market could reach 40% under accelerated scenarios, up from just under 2% in 2020, and that transformer costs could rise by roughly 4% to 10% over the following year. A plant planning a new line, a substation upgrade or even a switchgear replacement is now bidding into that same market.

People are the second queue. Nationally, the Beige Book said labour supply was generally adequate but that shortages persisted for specialised, technical and skilled trade workers. Dallas contacts said data centre developers were still struggling to find qualified electricians and technicians, and a large contractor in the San Francisco District said competition from data centre projects had driven up pay for electricians and other skilled trades. In the Kansas City District, manufacturers said they had increased average hours, added overtime and extended shifts because labour was limited, and one put the problem plainly: “It is hard to expand the workforce when they leave faster than you can replace them.”

Costs Are Arriving With the Delays

The Beige Book also described cost pressure that hits plants whether or not they share in the boom. Firms in several Districts expected prices to rise further as existing contracts and hedges expire. Higher diesel prices were the most commonly cited cost driver among Dallas contacts, and Atlanta contacts reported that construction inputs, particularly steel and mechanical equipment, saw more frequent upward price adjustments. Richmond manufacturers reported difficulty finding workers and said they do not expect improvement soon. For a manufacturer outside the priority lanes, the combination is awkward: no surge in its own demand, but higher prices, longer waits and stiffer competition for the people who keep its equipment running.

What Supply Chain and Operations Leaders Should Do Now

None of this means the data centre boom is bad news for industry. It does mean that plants outside it should stop assuming suppliers will treat them as they did two years ago, and should plan around the queue rather than join it late.

• Reorder long-lead electrical items now: any transformer, switchgear or breaker in a 2027 or 2028 capital plan should be specified and ordered this year, because lead times measured in years leave no room for a late purchase order.
• Protect critical spares on site: identify the motors, drives, breakers and controls whose failure would stop a line, and hold or reserve replacements before the same parts are committed to larger customers.
• Ask suppliers where you sit in the queue: a direct conversation about allocation, priority customers and expected lead times is more useful than a quoted date that assumes nothing changes.
• Secure electrical and maintenance trades early: with data centre projects bidding up electricians' pay, lock in contractor capacity for shutdowns and installations well before the work is due.
• Retain the people you already have: overtime and extended shifts can cover a gap for a quarter, but they add to the turnover that Kansas City manufacturers say is outrunning their hiring.
• Price the contract resets into 2027 budgets: with hedges and fixed-price contracts expiring, model higher energy, freight and metals costs now rather than discovering them at renewal.

The October Beige Book describes a manufacturing sector that is growing, but in a narrow channel. Plants inside that channel are adding staff and capacity. Plants outside it are discovering that a boom in someone else's order book can still lengthen their own lead times and raise their own costs. The ones that plan for the queue now will spend less time waiting in it.