Q2 Industrial Spending Off 65% From Last Year

Last year at this time, the U.S. industrial manufacturing industry was booming, noted research firm Industrial Info Resources here.

Sugar Land, Texas — Last year at this time, the U.S. industrial manufacturing industry was booming, noted research firm Industrial Info Resources here. Project activity was at a high point with an estimated $15.6 billion worth of capital and maintenance projects scheduled to begin construction during the second quarter of 2007. A year later, after the continued collapse of the automotive industry, the subprime mortgage crisis, the weakening of the dollar and the never-ending rise of the price of oil, the industry has experienced a dramatic reversal in spending. Industrial Info is tracking $5.4 billion worth of project activity that is expected to begin construction during the second quarter of 2008, a decrease of 65% from the same period a year ago, which is considered the beginning of the prime construction season.

Despite massive reorganization efforts within the Detroit Three, the Great Lakes region is still the leader in total spending for the coming quarter. $1.35 billion worth of capital and maintenance projects are scheduled to begin construction between April and June in 2008 within the Great Lakes region. Some of the key projects driving spending within the region include Chrysler LLC's, Auburn Hills, Mich., proposed $366 million Jefferson North assembly plant expansion in Michigan and $300 million worth of annual maintenance, repair and overhaul work performed by the Chicago Transit Authority on its rail system in Illinois.

The Southwest region is running a close second to the Great Lakes with $1.32 billion in anticipated spending during the quarter. Chief among the projects in this region include the Metropolitan Transit Authority's, Houston, proposed $439 million grassroot university light rail line, HelioVolt Corp.'s, Austin, Texas, proposed $80 million solar cell manufacturing plant addition in Texas and a $70 million Bayport Terminal complex Phase I wharf addition for the Port of Houston Authority in Texas City.

Rounding out the top five spending regions for the second quarter are the Southeast region with $1 billion worth of capital and maintenance work, the West Coast region at $681 million and the Northeast region with $296 million.

A closer look at where spending will occur shows that Texas is on top with an overall proposed spending total of just more than $1.1 billion during the quarter. The Lone Star State is followed by a quartet of states all in the $400 million-$500 million range: California at $490 million, Michigan at $446 million, Georgia at $444 million and Illinois at $417 million.

Even though spending has dropped significantly, $5 billion in spending for a quarter is still significant investment in the U.S. Companies are still spending money on building new plants or expanding, upgrading, renovating, revamping and performing maintenance at existing plants. Foreign automakers continue to invest heavily within the U.S., especially in Southern states and with those new facilities come new tier suppliers and their new plants as well. In addition, higher gas prices will bring additional pressure on states to move forward with light and commuter rail options.

Industrial Info Resources is a marketing information service specializing in industrial process and energy related industries with products and services ranging from industry news, forecasting, plant and project databases.