America’s energy rebirth is the gift that keeps on giving for the economy. But this year, it’s more about construction than drilling holes in the ground.
While the collapse in oil and gas prices since the middle of last year caused energy companies to slash investment in oil wells, Thursday’s report on second-quarter GDP showed an interesting dynamic taking shape — investment in factories has been running full bore.
It may be surprising on the surface, given that manufacturing has simmered down this year on the heels of a weaker global economy, but spending on all types of production facilities increased at a 65 percent annualized pace in the second quarter. That was almost enough to offset a 68 percent plunge in investment in wells and mines that marked the biggest drop in 29 years.
Outlays for factory-related structures jumped even more from January through March — surging at a 95 percent pace. Over the last four quarters, investment in plants increased an average 64 percent, the strongest since records began in 1958.