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Despite economic uncertainties, Industrial Info Resources (IIR) forecasts an increase in American and Canadian spending on projects with pipe, valves and fittings (PVF) for 2025. The forecast calls for $42.5 billion in spending for 2025, compared with $40.3 billion for 2024 (see Figure 1).
In terms of first-quarter 2025 project starts with PVF equipment needs, industrial manufacturing leads the way, followed by the oil and gas production and food and beverage industries.
Industrial manufacturing encompasses a wide swath of projects, including massive transportation systems, data centers, distribution and warehousing buildings and automotive factories. For most of 2024, overall U.S. manufacturing activity remained in contraction territory, according to monthly surveys by the Institute for Supply Management.
North America continues to dominate data center development, with the largest markets in Northern Virginia, Dallas, Chicago and Silicon Valley. Artificial intelligence (AI) advancements rapidly evolve data center technology, from advanced chips to newer, more sustainable cooling methods. While ground-up construction continues its growth in 2025, more facilities will be upgraded as operators and developers pivot toward AI.
The traditional data center markets have become highly saturated and more resource-constrained. As the land grab continues, local governments seek limitations to development. This has increased secondary/emerging data center regions in states like Ohio, North Carolina and Arizona, where investments are growing.
Going into 2025, the data center market continues to face its biggest challenge: power. Data center demand is predicted to grow 160% by 2030, driven by AI. In the Northern Virginia region, Dominion Energy is investing in transmission-line projects to boost power capacity by 2026.
Local governments are attempting to address power constraints by integrating renewable energy. Demand for data center space is not showing any signs of slowing. Vacancy rates remain persistently low, and 80% of new builds are pre-leased, indicating demand is expected to continue for the next few years.
The semiconductor sector is fueled by multiple disruptive technologies and applications, including AI and autonomous vehicles, which have surged in investment. While efforts to reshore semiconductor manufacturing are in full swing and the disbursement of CHIPS Act funding is well underway, the United States entered 2025 with a somewhat murky geopolitical and regulatory landscape.
The United States might be forced to re-evaluate its strategy as Intel, one of the biggest recipients of CHIPS Act funding, has been plagued by myriad issues after posting a staggering $1.6 billion loss in 2024 and announcing a 15% workforce reduction as its share price tanked.
On the other hand, Nvidia, a leader in AI technology, is beating revenue estimates. However, Nvidia’s chips are manufactured by Taiwan Semiconductor Mfg. Co. (TSMC), which holds the lion’s share of global semiconductor manufacturing.
With ongoing geopolitical tensions among the U.S., China and Taiwan, this heavy reliance on TSMC puts the United States in a vulnerable position. The COVID-19 pandemic taught the United States that it cannot rely so heavily on foreign manufacturers. In addition, an antitrust investigation has been conducted into Nvidia over concerns it is a monopoly.
Another consideration is the widening talent gap in this industry. With public and private investments in this sector estimated to total about $250 billion by 2032, the United States is adopting numerous initiatives to build these critical talent pipelines. This issue will persist, albeit to a lesser extent, in the coming years.
Automakers have invested heavily in electric vehicle (EV) manufacturing, bolstered by the 2022 Inflation Reduction Act, which included several provisions supporting EV adoption. However, Tesla’s Elon Musk, who is helping to lead an advisory board to cut government spending, has called for eliminating a $7,500 tax credit for EV buyers. President Donald Trump campaigned on ending Joe Biden’s “EV mandate.”
Plagued by multiple issues, including sticker prices, range anxiety and a lack of charging infrastructure, U.S. EV adoption has been rather disappointing. With the continued growing pains, automakers are delaying the startup of battery-electric vehicle (BEV) manufacturing plants or reducing investments in BEV projects, while prioritizing plug-in hybrids.
Traditionally, heavy manufacturing is a stable sector with healthy investments and few big fluctuations. The U.S. Department of Defense continues to be its biggest investor; the fiscal-year 2025 Defense Appropriations Act has earmarked about $852 billion in total funding, a 3.3% increase over 2024. This translates to spending growth for defense contractors such as Lockheed Martin, General Dynamics and Boeing.
The warehousing and distribution sector is expected to grow in 2025 as the need for automation increases. Robotic systems, from autonomous mobile robots to automated guided vehicles, are increasingly deployed to streamline operations and reduce labor costs. Advancements in wearable technology and AI enhance worker efficiency and safety. Micro-fulfillment centers are more widely adopted, allowing faster delivery times and reduced shipping costs.
Oil and gas production
U.S. and Canadian oil and gas production is expected to continue an upward trend into 2025. This is despite downward revisions to demand growth forecasts for 2025, primarily due to economic slowdowns in China and some other countries. U.S. oil production is expected to grow to smaller records in 2024 and 2025, according to the U.S. Energy Information Administration.
Currently the top oil producer in the world, the United States expects to pump 13.54 million barrels/day in 2025. While this would indicate that capital spending related to oil and gas production in the United States and Canada remains healthy, Chevron Corp. said in December that it favored free cash flow over production gains for 2025.
Capital spending on liquefied natural gas (LNG) is still expected to be the largest percentage of total dollars spent in 2025. Much of this depends on the status of the Department of Energy’s pause on approvals of LNG exports to nonfree trade agreement nations. The Republican wins in the U.S. elections will likely result in an end to that pause.
Oil and gas producers expect to maintain spending levels similar to 2024. Inflation has leveled off and interest rates have seen their first declines, which are good signs for those looking to make large capital investments across all industries. Commodity prices have the biggest impact on producers’ capital budgets. Production curtailments on natural gas investments were made in 2024 due to low natural gas prices.
Oil production spending is not expected to see the volatility that pure natural gas producers have experienced over the next 12 to 18 months due to consistent demand, record-high exports from North America, plus growing and diversifying global economies abroad.
Spending on natural gas processing and natural gas liquid (NGL) fractionation spending is expected to remain strong in 2025 as it has been over the past several years. Continued growing NGL and natural gas production in the Permian Basin has necessitated the need for additional processing and NGL recovery capacity.
Canadian operators expect to see healthy spending on gas processing and fractionation projects due to export opportunities driven by the anticipated startup of LNG Canada, increasing liquefied petroleum gas exports via Prince Rupert and the potential announcement of the approval for the expansion of LNG Canada.
Food and beverage
The industry continues to make adjustments through extensive automation, preparing for the AI infrastructure boom and tightening capital expenditures with only need-to-do projects with good returns on investment planned.
The continuing trends of grocery demand fuel cold storage warehousing, e-commerce and distribution. Lately, there has been some softening in demand due to persistent food inflation despite the U.S. Fed easing interest rates and a seeming abundance of food supplies. However, the industry remains mostly insulated from a weaker economy. The prospects for capital expenditures are moderately strong for 2025.
Automation and reduced labor costs have been elevated from a strong trend to a standard as the labor challenges posed by the COVID pandemic have boosted the need for manufacturers to improve operational safety and the bottom line, especially in warehousing and meat and poultry.
Environmental, social and governance projects and decarbonization continue to be critical trends in the industry as there is a long-term commitment from major food and beverage manufacturers to reduce their carbon footprints. However, there will likely be lighter spending for these climate-friendly goals as manufacturers focus on their operations during a weaker economy.
Grocery demand and cold storage remain strong and resilient despite signs of economic weakness. Large-scale investments have poured into automated shipping and retrieval systems as major leaders in grocery warehousing are poised to forge ahead by implementing new distribution centers to reduce labor costs and speed up storage and delivery times.
Brian Ford is editor-in-chief at Industrial Info Resources and has been with IIR since 2014. With global headquarters in Sugar Land, Texas, and 18 offices worldwide, IIR is a provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. To contact IIR, visit www.industrialinfo.com or call 713-783-5157.