Factory Construction Spending Declines, Contradicting Recent White House Growth Claims

2026-02-09 economy

Washington, Sunday, 8 February 2026.
While the President claims a 41 percent surge, official data reveals a 6.7 percent decline in factory construction spending, highlighting a widening gap between political rhetoric and economic reality.

Analyzing the Data Discrepancy

The divergence between the administration’s narrative and the economic indicators published by the U.S. Census Bureau is becoming increasingly pronounced. On January 20, 2026, and again at the World Economic Forum in Davos the following day, President Donald Trump asserted that investment in American factories had risen by 41 percent, calling it a record [1][3]. However, a meticulous review of the data paints a different picture. Since the President began his current term in January 2025, spending on building, expanding, and rehabilitating manufacturing sites has actually trended downward [1]. Specifically, from the final quarter of 2024 through the third quarter of 2025, manufacturing construction spending declined by 6.7 percent [1]. This contraction follows a period of historic growth under the previous administration; during President Joe Biden’s term (January 2021 – January 2025), the annual average rate of manufacturing construction spending surged by 212.053 percent, peaking at an annual average of $235.6 billion in 2024 [1].

The Role of Policy and Cycles

To understand this volatility, one must look at the legislative catalysts behind the numbers. Much of the previous surge was driven by the CHIPS Act, which allocated $39 billion to fund semiconductor manufacturing facilities [1]. Anirban Basu, chief economist for the Associated Builders and Contractors (ABC), notes that the current cooling is partly due to these CHIPS Act-enabled megaprojects winding down [1]. Furthermore, the sector is facing what Basu describes as the “stiff headwind of trade policy” [1]. Consequently, manufacturing construction spending has fallen by nearly 10 percent over the past 12 months, a figure that accounts for more than the entire decline seen in private nonresidential spending during this period [1].

Tariffs and Trade Friction

The administration’s trade policies appear to be exacerbating the slowdown rather than reversing it. Reports from January 2026 indicate that recent tariffs have increased costs for foreign parts used by manufacturers, with analysts suggesting these measures have not yet yielded the intended benefits [1]. This friction is evident in the employment numbers; the U.S. economy lost 63,000 manufacturing jobs in the first 11 months of President Trump’s current term, compounding a loss of 98,000 jobs in the preceding 11 months [1]. In the automotive sector, which is heavily integrated across North America, the strain is palpable. While the Canada-U.S.-Mexico Agreement (CUSMA) facilitated a trade volume reaching $1.9 trillion in 2024, industry leaders like GM and Caterpillar are now calling for updates to the agreement to streamline compliance and address new technologies [2]. The uncertainty surrounding trade policy has led to what the Wall Street Journal described as a “lost year for investment” [3].

A Paradox in the Labor Market

Despite the decline in factory construction spending, the broader construction labor market is facing a paradoxical shortage, driven largely by a pivot toward artificial intelligence infrastructure. While traditional factory projects may be stalling, the demand for skilled workers to build data centers is surging. Spending on new data centers rose by 32 percent in the first ten months of 2025 compared to the previous year [5]. This shift has created an urgent demand for labor; the construction industry is projected to need 349,000 new workers in 2026 to maintain equilibrium between supply and demand [7]. This is a critical issue for contractors, as nearly 20 percent of the construction workforce is currently over the age of 55 [5][7].

Looking Ahead

The economic outlook for industrial construction remains mixed. The American Institute of Architects’ consensus forecast projects further declines in manufacturing construction spending of 4 percent in 2026 and 1 percent in 2027 [1]. While some analysts, such as Chris Snyder from Morgan Stanley, suggest that supply chain cost calculations influenced by tariffs could eventually prompt new U.S. factories, the immediate data suggests a contraction [1]. For industry executives and investors, the current landscape requires navigating a complex environment where political claims of a boom contrast sharply with the reality of winding down megaprojects and trade-induced headwinds.

Sources

manufacturing spending industrial construction