The factory-building boom that’s sweeping the US is not happening in other advanced economies, the Treasury Department said, highlighting a gap that’s opening up as the Biden administration plows cash into incentives to spur domestic manufacturing.
(Bloomberg) — The factory-building boom that’s sweeping the US is not happening in other advanced economies, the Treasury Department said, highlighting a gap that’s opening up as the Biden administration plows cash into incentives to spur domestic manufacturing.
Construction spending by manufacturers in the US has more than doubled in the past year, reaching an annual rate of almost $190 billion in April. The surge is mainly being driven by the electronics industry, where factory-building has almost quadrupled since the beginning of 2022, the Treasury said in a blog post due to be published Tuesday.
“The boom in US manufacturing construction is a real one: driven by the administration’s policy focus and led by technology manufacturing,” Treasury officials Eric Van Nostrand, Tara Sinclair and Samarth Gupta said in the blog post. “The surge appears to be uniquely American,” and it’s not coming at the expense of other types of construction, they said.
As part of the most ambitious US industrial policy in decades, the government is offering subsidies worth tens of billions of dollars for companies to make all kinds of key products — from semiconductors to electric cars and their components — at home.
‘Critical Part’
It’s a bid to reverse, at least in certain industries, the economy’s long-term deindustrialization. The US, along with European countries, has seen a slide over several decades in the share of the workforce employed in manufacturing, as Asia took over the role of the world’s factory powerhouse.
Other advanced economies have not experienced similar surges in building activity, the Treasury officials said, pointing to numbers from industrial heavyweights Germany and Japan that are stable or down from pre-pandemic levels. The UK and Australia did see a “meaningful increase” in industrial construction last year, but that has subsequently leveled off, they said.
Incentives that the US has been handing out to boost manufacturing at home have created tensions with some allies in Europe and Asia, who’ve expressed concerns that the measures may lure investment away. Some have announced plans for their own subsidies.
The Chips and Science Act signed last year, which offers grants and tax credits for semiconductor manufacturing in the US, has played a “critical part” in the surge, which began in the months before the legislation was passed, according to Van Nostrand, Sinclair and Gupta.
While manufacturing has seen the biggest increase, other types of non-residential construction have also been on the rise. That’s largely driven by higher government funding for public infrastructure — such as roads, bridges, public transit, water and broadband — under the Infrastructure Investment and Jobs Act signed in November 2021, they said.
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