The Dodge momentum bounced back in May, up 5.4 points or 4.0% month on month. On a 12 month moving average (12MMA), basis the index scored 136.2, up 1.2%. The Momentum Index is a monthly measure of the initial report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year.
Figure 1 presents the Dodge momentum index and its 12 month moving average (12MMA) from 2012 to present. The index has been trending higher since mid-2015, a very encouraging sign for future growth in non-residential construction.
Figure 2 breaks out the commercial sub-index and its 12MMA. The commercial sub-index shows a steady advance when viewed on a 12MMA basis. In May, the commercial sub-index increased 4.8% to an eight year high, which suggests that construction activity for commercial buildings will continue to rise over the next year. This continued advance contradicts traditional signs of a softening market to include lower occupancy rates and downward pressure on rental rates. Note that the commercial index has a similar profile when compared to the overall momentum index. This is because a lot more money is funneled into commercial (private), than into institutional (public), non-residential projects.
Figure 3 shows the institutional sub-index and its 12MMA. It shows a lot more volatility than the commercial segment. Its 12MMA remains has moved sharply higher after three strong posting in January, February and March.
In May, six projects with a value of greater than $100 million entered the planning stage. In the commercial sector, the leading projects were the $245 million Camden Partners office tower in Camden NJ and the $140 million first phase of the Gateway of the Pacific office complex in San Francisco CA. The leading institutional building project was a $100 million detention center in Conroe TX.
At Gerdau we regularly monitor the strong relationship established between the Dodge Momentum Index and actual non-residential construction spending one here hence. This is a valuable leading indicator for planning purposes for construction industry professionals including you our valued customers.