Why is manufacturing construction spending so high?
Why is manufacturing construction spending so high?
In May 2023, there was 194 billion in construction spending in the United States.
This is primarily a semiconductor, computer, and electrical related manufacturing investment being driven by the CHIPS Act, which includes batteries. This sector was a relatively small share of manufacturing construction in the past decades but now it is the dominant component.
This government backed demand to build chip fabrication plants, battery plants, and renewable energy facilities is fueling construction spending for the manufacturing industry. You also have companies that are leaving China to de-risk and diversify manufacturing.
It is important to adjust for price increases because construction costs have risen sharply in recent years. Nominal spending should not be misconstrued for increased physical construction.
The boom in the computer / electronic segment has not been offset by reduced spending on other segments which have been largely consistent over time.
Works Cited:
https://home.treasury.gov/news/featured-stories/unpacking-the-boom-in-us-construction-of-manufacturing-facilities
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