We got a bunch of economic data on the productive economy today — making and building things. And let’s say it was not so much a “one-two punch” as, “a punch, and then a pat on the back.” 

So first, the punch: on manufacturing. The Institute for Supply Management’s Purchasing Managers Index for November came in flat, worse than expected, in “contractionary” territory for a 13th straight month. New orders, employment, inventories were all down.

Now the “pat on the back”: construction spending for October. The Commerce Department reports it was up 0.6% from September, up more than 10% from a year ago. 

You’d think the Fed’s rate hikes, a struggling housing market and a slowing economy would hurt both sectors. Let’s figure it out.

High interest rates and a slowing global economy have been challenging for U.S. manufacturers. Bill Adams at Comerica Bank said there’s a lot of uncertainty: about what consumers will do, and how much stuff businesses that sell to them will need.

“Businesses are being more cautious in managing their purchases. Supply chains are functioning much better than during the pandemic. But that also means businesses aren’t maintaining precautionarily high levels of inventories,” Adams said.

And higher interest rates make a lot of manufactured goods more expensive — from business equipment, to home appliances, to cars and trucks, said Beth Ann Bovino at U.S. Bank.

“Auto manufacturing — hit by labor strikes but also weakness from higher borrowing costs as pent-up demand starts to be exhausted,” Bovino said.

Meanwhile, over in the “construction” aisle of the economy, it’s a whole different story.

“Fantastic,” said Tony Libert, describing the business environment right now. He’s a 60-year-old construction electrician in Madison, Wisconsin.

“We’re very healthy. The work outlook up here looks great for the next several years,” Libert said. His union’s apprenticeship program is filling up, and there’s lots of work building hospitals, nursing homes, retirement communities. 

That squares with the story of strong housing demand nationwide, said Danushka Nanayakkara at the National Association of Home Builders. 

“The housing market is poised for gains for 2024. There’s a large amount of multifamily units under construction right now — over a million units,” Nanayakkara said.

Also a lot of factories, accounting for nearly half the growth in construction spending this year, said Bill Adams. 

“So even though manufacturers are pretty cautious about the outlook for the next couple of months, they are investing in production capacity for the next 10 and 20 and 30 years,” Adams said.

A lot of that’s thanks to the CHIPS Act and federal spending on electric vehicle technology and infrastructure.