reader john h.taking into account the time Investment boom in manufacturing structurewrote:
In my opinion it has something to do with Russia’s invasion of Ukraine (like many other changes in the economy!)
While I agree that Russia’s expanded invasion of Ukraine did have a significant impact on the US and global economy, I don’t think this is the time to argue that the surge in investment in manufacturing structures was caused by the war. Instead, I think the conventional wisdom that the CHIPS Act was central to this development is correct (e.g., here); a closer examination of the timing of events corroborates this view.
figure 1: Month-on-month change in nonresidential investment (except structures) (blue bars), nonresidential structures (except manufactured structures) (tan bars), and manufactured structures (green bars), in billions, seasonally adjusted earnings for 2012 ( SAAR). Sources: BEA 2023Q2 leading data, Table 5.4.6U, and author’s calculations.
Growth in non-residential structural investment was negative following the Russian action in February 2022, but manufacturing structural investment only turned positive after the passage of the CHIPS Act.
In addition, defense procurement (particularly spending on intermediate goods) declined following Russia’s actions.
figure 2: Spending on intermediate durable goods (blue bars), intermediate nondurable goods other than petroleum (pink bars), and petroleum products (green bars), all in billions of dollars, at seasonally adjusted 2012 exchange rates. Source: BEA Q2 2023 GDP advance release, Table 3.11.6 and authors’ calculations.
It is difficult to see how a reduction in spending on intermediate goods would be reflected in an increase in private investment in manufacturing structures.
