Manufacturing Construction Fueling US Economic Growth

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According to data from the US Commerce Department, factory and plant construction has fueled the recent uptick in US economic growth.

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A recent USA Today article notes that a 12.6% surge in spending on non-residential structures — notably new and expanding factories — was a big reason for last week’s upward revision of second quarter economic growth. Commerce said the economy expanded at a 4.6% annual rate, up from its previous 4.2% estimate and the strongest growth in 2-and-a-half years.

According to USA Today, auto sales, the housing recovery and the oil and natural gas drilling boom are all forcing manufacturers to build or enlarge plants to supply these industries. Factory output is up 3.2% so far this year after rising 2.6% in 2013.

While overall construction spending was down again in August as general contractors continue to use economies of scale to do more work with less wasteful procurement spending and rework, spending on construction or renovation of factories is up 12% so far this year after being virtually flat in 2013, Census Bureau figures show. Factory construction had declined steadily since 1998 as much of US production moved offshore, but now the number of US factories has stabilized.

Lean principles are also making these newer factories more efficient and able to serve a global audience, just as with lean construction. US factories were running at 77.3% of capacity in August, up from 63.9% in 2009 and near pre-recession levels.

Factory production did, indeed, drop 0.4% last month as motor vehicle production fell sharply after surging in July, according to Commerce figures. The drop confounded economists’ expectations for a 0.3% rise. Many blame the hiccup, though, on changing productions methods in the automotive industry. Motor vehicle output declined 7.6% last month after a 9.3% jump in July. According to Reuters, economists attributed the surge in July to difficulties adjusting the data for seasonal fluctuations after some automakers kept assembly lines running instead of closing plants for the traditional summer retooling.

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