The Dodge Momentum Index moved up 0.6 percentage point in June to 134.7 or +0.5% month on month, (m/m). On a 12 month moving average (12MMA), basis the index scored 135.8, flat y/y.
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, however the index has plateaued over the past three months when viewed on a 12MMA basis.
Figure 2 breaks out the commercial sub-index and its 12MMA. The commercial sub-index has also begun to plateau over the past couple of months when viewed on a 12MMA basis. In June, the commercial sub-index increased 0.4%. It was off 1.5% on a 3MMA and flat when examined on a 12 month moving average basis.
There is evidence of a slower market as a function of lower occupancy rates (not including multi-family), which is putting downward pressure on rental rates. In its Q1 outlook, Real Capital Analytics (RCA), reported that the volume of commercial sales in large commercial real estate markets totaled $133.8 billion, a 20% year-over-year decline.
Figure 3 shows the institutional sub-index and its 12MMA. It shows a lot more volatility than the commercial segment. The institutional sub-index increased by 0.6% m/m, was down 0.6% 3MMA y/y and flat on a 12 month y/y comparison.
The rise in the index over the past four months suggests that the construction sector remains healthy. In July, 11 projects with a value of greater than $100 million entered the planning stage. For the commercial building sector, the leading projects were a $200 million mixed-use project in Sugar Land TX and a $161 million office in Fremont CA. The leading institutional projects were a $177 million hospital tower in Chapel Hill NC and a $138 million hospital in Atlanta GA.
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.