August 17, 2026

The below transcript is a translation of the podcast audio that has been machine generated by Notta.

00:00 Derek Stanley: And we, after that saw a trend upward in utilities production, which we hadn’t seen in over ten years. So that growth and that increased demand for power generation is largely attributed to the data center space. I mean, some of that was due to the housing sector boom right after Covid, both in the multifamily and single family sectors.

00:21 Taylor St. Germain: Hi, everyone. This is Taylor St. Germain with ITR Economics. Thanks so much for joining me on this episode of TrendsTalk. We at ITR are your apolitical and unbiased source of economic intelligence. And today we wanted to discuss some emerging markets, some high growth markets. And I have my colleague Derek Stanley with me. He’s an economic consulting manager at ITR. He’s been on previous episodes, so we’re happy to have him back. Derek, thanks for being here.

00:45 Derek Stanley: Hey, thanks for having me.

00:47 Taylor St. Germain: So we wanted, about a month back, Derek and I actually discussed, I think it was about a month, Derek, but not too long ago, we discussed data centers and it’s a big market, it’s a growing market, and an emerging market. And I wanted to give you an update on the data center market here to start, but I’m doing that intentionally because Derek’s going to fill us in on another market that we’re seeing a lot of growth opportunities in as a result of data centers. So let me first share that data centers construction has slowed down, folks. And that’s something we expected to happen. Now we do not expect that data centers are falling off a cliff or that there’s this data center bubble that’s about to burst. But we have seen the growth rate slow down, I’d say appreciably since compared to the same time last year. So the data center construction market over the last twelve months totaled about $54 billion. So that’s $54 billion worth of data center construction in the last twelve months. That is a record high from a dollar value perspective, but the growth rate on an annual basis has slowed down to about 27.3%. And I think that’s given folks a little bit of anxiety because around this time last year, that year over year growth rate was at 70%. So have data centers slowed down? Yes, they certainly have. But we are still forecasting double digit growth in data centers as we move through the end of this year and even into next year as well. So do expect that the data center market continues to slow in its rate of rise. But we’re not expecting a bubble to burst or a cliff out in front of us in data centers. Now, one thing we have discussed a lot as a result of data centers is an inflationary component, which is the fact that we have seen a lot higher electricity costs here in the US. And some of that is due in part to all the data center construction and the demand for electricity that data centers draw. There’s a lot of articles from different states talking about the level of just electricity consumption from the data center space. If you look at the producer price index, so it’s a PPI, it’s a measure of cost for electricity here in the US that is at a record high. And you know, I think this is a great segue into the information that Derek had prepared. And I’m glad he came on with this information, because there’s another market that’s growing rapidly right now. That’s a real area of opportunity for the industrial base of clients that we work with. And it’s that electricity and power generation market. So Derek, fill us in on PowerGen, electrical distribution, all that fun stuff and what’s going on in that space.

03:32 Derek Stanley: Yeah, yeah. Thanks, Taylor. So I guess I’ll back it up here. One of the key things that we look at to basically assess how the power generation sector is trending is looking at electric and gas utilities production. So essentially that market expanded from well before the 90s up until around 2008. So at 2008, we obviously know what happened then. And after that, we saw sort of a lull in the production, the industrial production sector. So it went through periods of growth and expansion, then decline in the years after the Great Recession. But we didn’t really see those peaks continue to ascend after that. And we saw the same thing in power generation. So that kind of plateaued for a period of about, I don’t know, ten plus years, but then bring on roughly early 2020, so you know, we had the pandemic. And then around that time, we started to see a lot of growth in the data center space as you brought up. And we expect that to continue. We talk about moratoriums, there’s a lot of political risk out there. But from a purely demand perspective, we expect data center construction to continue to grow, at various paces over the next three years. And we, after that, saw a trend upward in utilities production, which we hadn’t seen in over ten years. So that growth and that increased demand for power generation is largely attributed to the data center space. I mean, some of that was due to the housing sector boom right after Covid, both in the multifamily and single family sectors. Then there’s pockets of growth in the nonresidential side, but right now the multifamily sector is starting to decelerate a bit, the single family market is still well below year ago levels. And most of the nonresidential market is also trending downward right now, it’s on the backside of the business cycle, except for a few pockets of opportunity. You talked about data centers, but power generation facilities are starting to benefit from this increased need in the United States to build more power capacity. So the thing that we looked at is again, looking at electric power generation, which leads power facility construction by about 19 months. So right now we’re seeing our needs for power production going up for the obvious reasons. You know, AI, cloud computing, remote work, demand for data centers. As a result, we’re going to have to continue to build out that capacity in the future. So we really see that as a market of opportunity and the nonresidential construction world. So if you’re a contractor somehow tied to the construction process, that beyond the data center market could be an area that you might want to consider, or put more emphasis on. If you are a company that supplies parts to utilities, public utilities, IOUs, whatever it may be, you’re probably going to see increased demand in the years to come. Obviously, things are regional. We know there’s some discrepancies on state by state basis, but we’re talking the national trend. We know we have more demand out there. Onshoring is something that we factor into our long term industrial production outlook. So our needs to produce more energy are going to continue to rise. We are already starting to see a early tick up in nuclear power production. Coal, which has been declining for a long time, is starting to level out right now. Will that trend continue? We’ll see. But the point is, we need more power in the country to meet that data center demand and meet general growth in the industrial sector as well. So that’s the broad picture. Like I said, there’s nuances, but if you have any way to pivot and capture some of that growth in the utility sector and the power generation facility build out, there’s opportunity for you there.

07:09 Taylor St. Germain: Yeah, and Derek, I think you get credit for one of the charts I’ve been presenting to a lot of our consulting clients, which is, you know, industrial production is this big macroeconomic data series that we discuss on TrendsTalk all the time. But if you break that industrial production down into its two largest subcomponents, it’s manufacturing and utilities. And manufacturing is flat, actually even slightly down relative to the pandemic, while the utilities component of the industrial economy just continues to set new records, it seems like with almost every month of data that comes out. So folks, we’re seeing this across the board, and we can even bring this conversation to the 2030s. One of the top eight industries that we’ve been discussing as it relates to the 2030 timeframe is the electrification. So it’s this exact space, its power generation, distribution, transmission. There’s going to just be an increasing need with the direction our economy is moving in terms of AI investment, data center investment, like Derek said, cloud computing, the digital transformation that’s going on. And so for those more industrial clients that are looking for some areas to grow when the rest of the industrial economy is rather lackluster right now, there’s a lot of opportunity in this utility and power generation space. So we urge you to take a look at that. I’ve had more calls with Fortune 500 companies lately that are asking me about this space. So, folks are slowly, you know, continuing to target this space more and more. So while I think data centers gets all the credit for the growth, there’s growth to be had elsewhere, even in these more industrial markets. And Derek and I, and the team at ITR, certainly help for those of you that can, you take advantage of this because it’s going to be a great place to be, not just now, but as we look at the long term, even during times of economic challenges, which we still expect to be coming our way. We’ll talk more on this market. We want to keep you up to date on AI, data centers, and in the markets that support it because of the growth. So we’ll continue to keep you all updated. But for now, folks, we hope you enjoyed this episode of TrendsTalk as always. Please like and subscribe to TrendsTalk wherever you listen to your podcasts. Thanks for being on Derek, look forward to having you back. And everyone, we will talk to you on the next one. Thanks so much. Take care for now.