The monthly report on total U.S. construction spending released by the Census Bureau recently showed a sharp increase.
According to the latest report, the amount of money spent on the construction of manufacturing facilities spiked up by 22 percent in January when compared with the same month from last year to a total of nearly $5 billion for the month. By comparison, the January increase in combined spending for all types of nonresidential construction projects was a moderate 4 percent.
To add some further context to this January spike in spending for manufacturing, these types of projects accounted for more than 11 percent of the monthly total for all nonresidential construction spending. There were only two types of nonresidential construction with greater spending in the latest month: projects related to the generation and distribution of power; and educational facilities. There was more spent for manufacturing construction in January than for commercial space, office space, or highways and streets.
I have been reading these data reports long enough to know that one month does not a trend make. There can be unusual, one-time reasons for a one-month spike in data such as this. These data are also subject to subsequent revisions; therefore, it is possible that the good news will be revised away in the coming months.
Now I have no trouble admitting that I would like the robust growth in construction spending for manufacturing facilities to continue for a long time to come. So I went back to the historical data to check the recent trend in this particular data series. A strong monthly performance such as this one is much more likely to persist into the future if it is supported by a strong trend in the recent past.
As it turns out, the total amount spent on the construction of manufacturing facilities in 2014 was more than $55 billion. This represented a jump of more than 15 percent from the total spent in 2013. Last year, money spent on manufacturing construction projects accounted for just over 9 percent of total nonresidential construction spending.
This is a salubrious trend indeed, especially in light of the fact that the combined total spent for all nonresidential projects in 2014 escalated by just 6.6 percent when compared with the total from 2013. So the recent trend in spending for manufacturing facilities is strong, and the January data suggest this trend may even be gaining momentum. My latest forecast calls for an annual gain of at least another 15 percent in 2015. This would push the spending total to about $65 billion for the year, and it would make the manufacturing category the fourth largest in terms of total dollars spent behind power, highways and streets and education.
In my opinion, that's right about where it belongs.