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Despite a small downturn in nonresidential construction in May, the annual change in spending on those projects jumped to a 15-year high. Persistent strength in non-residential spending was a key catalyst in Morgan Stanley’s recent increase in the US’s 2023 growth prospects – particularly expenditures on infrastructure projects that have been boosted by rising public investment. An all-time high in operational construction cranes in the US and Canada through Q1 should continue to bolster optimism among developers, engineers, and construction equipment suppliers.

Related ETF: First Trust RBA American Industrial Renaissance ETF (AIRR)

Earlier this month, data from the US Census Bureau showed that nonresidential construction spending in the US dropped -0.2% MoM in May, the first decline in a year. Despite that sudden downturn, our outlook for the construction, engineering, and building materials industries remains broadly positive, particularly in regard to infrastructure expenditures. Though nine of the 16 nonresidential subcategories saw declines, public safety, water supply, and sewage and waste disposal were among those that experienced a gain. All three of those categories are mentioned explicitly as recipients of funding in the $1.2 trillion Infrastructure Investment and Jobs Act of 2021. Though the monthly decline in the headline index would be concerning if it were the start of a trend, a relentless increase over the last year showed spending on the construction of nonresidential structures was still 17.3% higher on an annual basis – tied with March at a 15-year high.

The rise in nonresidential construction activity was cited as a key catalyst in Morgan Stanley’s recent upgrade of the US growth picture for 2023. Last week, the investment bank’s economists said incoming data now points to “a more comfortable soft landing than we had anticipated, led by public investment in infrastructure and nonresidential structures investment”. Morgan Stanley now sees…

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