May Factory Construction Spending Up 76% Year-Over-Year - Modern Distribution Management

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May Factory Construction Spending Up 76% Year-Over-Year

The CHIPS and Science Act and the Inflation Reduction Act are linked to the recent rise in construction spending, according to the WSJ.
Crane and building construction site against blue sky

May factory construction spending was up 76.3% year-over-year, and up 1.0% from April, according to new data released July 3 by the U.S. Department of Commerce.

According to the Commerce Department, construction spending rose 0.9% seasonally adjusted from a month earlier in May. Spending on manufacturing facilities was once again an important component of that, according to an analysis from The Wall Street Journal.

The department’s numbers show manufacturing structures accounted for nearly 0.5% of gross domestic product in the first quarter, the highest share since 1991. This GDP share is expected to increase in the second quarter, the WSJ reported.

The CHIPS and Science Act and the Inflation Reduction Act — both passed in August 2022 — may be playing in a role in the spending increase, the newspaper reported.

“The CHIPS Act includes incentives for investing in semiconductor production, while the IRA includes incentives for items such as the production of electric vehicles and using domestically produced content,” the WSJ said. “Economists at Goldman Sachs note that the uptake in these incentives appear to be surpassing earlier estimates.”

According to a July 3 report from the U.S. Census Bureau, construction spending during May was estimated at a seasonally adjusted annual rate of more than $1.92 trillion, 0.9% above the revised April estimate of about $1.90 trillion. The May figure is 2.4% above the May 2022 estimate of $1.88 trillion.

Source: U.S. Census Bureau

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