Manufacturing Comeback?
The construction industry is seeing a boom, with heavy investments from the manufacturing sector in new projects, according to the latest Marcum Commercial Construction Index. Spending in this category is up 186% in the past three years, as Anirban Basu, our chief construction economist, points out in the Q4 2023 report.
While it may be a while before manufacturing in the U.S. makes a proper comeback—labor shortages remain a problem—this latest growth is one of many positive indicators of the regrowth of manufacturing on U.S. shores. With manufacturing making up a little more than 10% of the U.S. economy, what happens in this sector also affects many other industries.
Fueling the growth are several laws signed in 2021 and 2022—the Infrastructure Investment and Jobs Act, the Creating Helpful Incentives to Produce Semiconductors and Science Act, and the Inflation Reduction Act. They’ve brought needed capital into the industry, which is seeing record private-sector investment, notably in areas like semiconductors, where demand has been surging. There are also tax incentives in this legislation, as some of you are aware. Many of our clients have been working with their Marcum professionals to take advantage of them.
All of the investment in manufacturing is a good sign for the nearshoring trend, which many people welcome. Relying on distant manufacturers for staples we rely on—whether semiconductors or consumer packaged goods—has historically been less costly in many scenarios than making products in the U.S., but there are some major tradeoffs. A big one is the risk of shortages if the supply chain is disrupted. No one wants to go back to the days of stockpiling toilet paper.
Beyond this, many communities want to bring back high-quality, local manufacturing jobs—the kind that can support a family. This new spending in the industrial sector could help to rebuild the base of good jobs in cities that took a hit when jobs moved offshore.
With construction booming in the manufacturing sector, real estate investors may also find new opportunities. Demand for office and warehouse space has been down, and many investment firms are looking for new pastures.
The big question for 2024 and beyond will be about interest rates and when the Fed will cut them. All real estate sectors have been affected by high-interest rates, which have added to the cost of acquisitions and purchases and ongoing overhead for real property. If interest rates go down, the economy could see growth in many areas. That’s something everyone can get behind.
Today is International Women’s Day, a day that celebrates the achievements of women and brings a focus on accelerating equality for women around the world. There has been tremendous growth of women in the accounting profession in recent decades, with women now making up 60% of accountants and auditors in the U.S. That pipeline of talent bodes well for greater diversity at the top of our profession, an area where women are still underrepresented at many firms.
Sunday is Daylight Savings Time. Don’t forget to turn your clocks forward by one hour. Enjoy that extra hour of daylight everyone!
