Note: This index is a leading indicator for new non-residential Commercial Real Estate (CRE) investment, except manufacturing.
From Dodge Data & Analytics: Dodge Momentum Index Moves Higher in May
The Dodge Momentum Index rose 2.4% in May to 119.4 from its revised April reading of 116.6 (2000=100). The Momentum Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. The increase for the Index in May was due to a 6.5% gain for projects entering planning in the commercial sector, which more than offset a 3.4% decline for such projects in the institutional sector. May’s increase places the overall Index 3.6% higher than its year-ago level, suggesting further growth in construction activity in 2016 despite the subdued first quarter GDP report and signs that lending standards are beginning to tighten for commercial projects. The commercial portion of the Index rose in May for the second consecutive month and is at its highest level since September 2015. This recent improvement for commercial projects provides some evidence that construction plans are moving forward after the severe drop-off in planning that occurred with the financial market instability in late 2015. At the same time, institutional planning is 1.3% lower than it was in May 2015, settling back for now from the heightened activity reported in late 2015 and early 2016.
This graph shows the Dodge Momentum Index since 2002. The index was at 119.4 in May, up from 116.6 in April.
According to Dodge, this index leads “construction spending for nonresidential buildings by a full year”. This suggests further increases in CRE spending over the next year.