It has been an odd few months for somebody who relies on information. The data flow simply stopped as the government shut down, and that left the prognosticating crowd more dependent on guessing than usual. Granted, it has been pointed out by J.K. Galbraith that the only function of economic forecasting is to make astrology look respectable, but we try to react to what the latest data tells us. So, what do we know now? Fortunately, the government is not the sole provider of data. There are many private sources that churn out information as good as—and sometimes better than—what the various agencies put together.

We have a pretty good idea what drives construction demand—residential as well as nonresidential. At the heart of the sector is growth, and construction generally follows that growth. It is risky for construction to get too far ahead of growth, but there is a need to avoid falling too far behind—hence the search for the development sweet spot. Residential construction is driven by the need for housing, and that means paying attention to migration patterns. At the moment, there is an exodus of people from high tax and high cost-of-living states to those judged more economically reasonable. That prompts departures from the Far West and Northeast, and arrivals in the Midwest, Southeast, and Mountain West. Job opportunities once dominated motivation for relocating, but many people now can work from anywhere, and that changes patterns. People are free to choose where they live according to factors such as recreational preferences, proximity to family, and so on. These patterns are reflected in local data. The jobless rate for the country as a whole may be 4.3%, but in North Dakota it is 2.5%, while California sports a rate of 5.5%. Other factors are more traditional and permanent: mortgage rates, job security, and the like. A small increase or decrease in the mortgage rate will push the residential market in a new direction. This is an important factor to consider, as most business is ultimately local. It is interesting to note national trends in factors such as employment, inflation, growth, etc., but what really matters is the local pattern.

Nonresidential construction reacts to a more complicated set of variables. Financing certainly plays a big role, but a potentially very lucrative project will be worth pursuing even if financing costs are high. Demographics will play a major role, as the number of rooftops will be studied by everything from retail to those building government services. The timing is crucial. Support services can’t be developed too soon, but late is not an option either. Shifts in business development will drive overall construction, and three developing arenas will impact the nonresidential sector. The first is the dramatic need for more energy. It is estimated that an additional 44 terawatts of power will be needed in the next 3 years just to power artificial intelligence (AI). Texas is planning the construction of at least 25 peaker plants to provide energy during the summer months in 2026. This demand on the grid will only expand with the development of more robotics. A second driver has been health care, as the Boomer generation ages and demands more and more care. This has been accelerated by the decentralization of health care—with more facilities located closer to where populations are growing—and specialization of services. Transportation and logistics continue to be a driver as well. The retail trends favor online activity, which amplifies the need for warehousing and all the necessary elements of supply chain management.

The important point is that growth is still taking place in many parts of the nation, and in many industries. Overall, the U.S. growth rate is still thought to be in the 4.0 range (according to GDPNow). Much of the country is seeing even better numbers (while others are slower). When it comes to data, the more local the better; in a nation this big, almost every state is equivalent to a country.

For those in the insulation business, the patterns in manufacturing are vital. This is where things are getting interesting. We have been tracking manufacturing for years, and our latest data shows a truly remarkable pace of growth into next year—with more expansion than has been seen since before the recession of 2008–2009. It really baffled us at first, as we have been hearing all the same gloom and doom discussions regarding the U.S. manufacturing community. As we dug into the rationale for this growth, though, we noted three motivations. The first and likely most important was restoring. The tariff policies at the start of the year were designed to promote more U.S. domestic consumption and encourage companies to return to U.S. production; but, in truth, this has been taking place for many years. Since 2022 there has been an average of $1 trillion of reshoring every year, and last year it hit $2 trillion. The simple fact is that producing overseas had become expensive even before the tariffs as transportation costs went up, along with wages and other costs involved in manufacturing in nations like China. A second factor is the growth of technology and robotics. It has been nearly impossible to find the people needed in manufacturing, and that forces companies to turn to technology and robotics, stimulating more manufacturing activity. Finally, there has actually been some encouragement for manufacturers as communities seek this expansion as a means by which to develop jobs and employment.

We often discuss manufacturing as if it were a unified entity, but we know that is not accurate. Growth in one sector doesn’t automatically equate to growth in another. Automotive has stalled a bit but is still growing at a faster pace than was the case even a few years ago. Aerospace has been growing aggressively and so has the medical sector. Some of this potential growth is logical and was predicted. Medical is surging for the simple reason that, as noted earlier, the large population of Boomers is aging, requiring more from the medical community—a group that has also struggled to find workers. The sector has been forced to rely on technology and robotics more than ever. The fastest growing segment of construction has been in manufacturing, as these facilities have to be upgraded to accommodate all the machines and technology—including the tremendous need for power to accommodate AI.

The insulation world gains in importance as all this development takes place. There is need to protect facility space as well as the machinery inside these facilities. If the growth in manufacturing we are seeing is real (and we think it is), the prospects for the sector are very good for 2026. The same can be said for nonresidential construction, as this has been a major contributor to the expected growth rates cited. Third quarter numbers will be at 3.9% or possibly above, and that is twice what the United States averages over a 20-year period (2.0%). Much of this growth has been attributed to the consumer (54%), but a good 30% comes down to the nonresidential activity in areas such as transportation, data centers, and energy. With that demand come challenges: Will there be a labor force sufficient to handle the load? Will commodities be available, and at reasonable prices? Will barriers in the regulatory world compromise expansion plans? Will local economic distress derail opportunities? There is an expected boost from the Bonus Depreciation provisions in the One Big Beautiful Bill Act, but that has sent construction companies into a frenzy as they try to determine whether they will be able to meet the deadline of completion and operation by 2030.