A recent WSJ article discusses the recent increase in construction spending on manufacturing facilities in the United States. This surge in manufacturing construction can be attributed to the CHIPS (Creating Helpful Incentives to Produce Semiconductors) Act and the Inflation Reduction Act, both of which were passed in August of the previous year.
Interestingly, the increase in manufacturing construction is happening despite low sentiment among manufacturers. The Institute for Supply Management reported a decline in its index of manufacturing activity in June, indicating a contraction in factory activity.
The long-term impact of this surge in manufacturing construction on manufacturing activity is still uncertain and will depend on when the new capacity comes online. Nevertheless, manufacturers' investment in new capacity is considered a positive development for the economy, even in the face of sluggish demand for manufactured goods in the post-pandemic period.
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