After a flat 2013, manufacturing “construction put-in-place” for 2014 ended on a high note, with an increase of 11%. FMI forecasts additional growth of 10% in 2015, totaling $58.6 billion (click here to see chart).
The primary driver for the manufacturing renaissance is the increasing production of oil and natural gas, mostly from shale deposits in the United States and Canada. Energy is one of the largest inputs to cost for manufacturing, but pharmaceuticals and petrochemical products benefit on multiple levels due to use of the byproducts and distillates of oil and gas.
Improving energy supplies, a ready labor force, and deteriorating geopolitical situations around the globe make returning to U.S. manufacturing a more attractive option. It has also become more desirable for foreign companies to locate in the United States to be closer to their markets.
However, it’s not all champagne and roses. The manufacturing sector is susceptible to future energy price hikes here and in markets abroad. Although newer facilities are more energy efficient, manufacturing capital construction is highly cyclical when markets reach a state of overcapacity, as some petrochemical products are expected to do in the next few years after a spate of building.
