The Dodge Momentum Index fell 4.6 points in July to 135.0 or -3.3% month on month, (m/m) from its revised June reading of 139.6. A 6.5% decline in the institutional sub-index was the main reason for the drop. 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 its12MMA from 2012 to present. The index has been trending higher since mid-2015. The rate of growth (slope), has flattened-out over the past three months when viewed on a 12MMA basis. Despite the decline in July, the Dodge Momentum Index was up 8.8% year on year (y/y), on a 12 month moving (12MMA), average basis.
Figure 2 breaks out the commercial sub-index and its 12MMA. The commercial sub-index has also begun to plateau over the past few months when viewed on a 12MMA basis. In July, the commercial sub-index fell 1.1%. It ticked up 0.5% on a 3MMA and was up 0.3% on a 12 month moving average basis. On a 12MMA y/y basis, the commercial sub-index was up 12.3%.
Figure 3 shows the institutional sub-index and its 12MMA. The institutional sub-index fell by by 6.5% m/m, was flat 3MMA y/y and down 0.4% on a 12 month y/y comparison. The institutional sub-index has historically been volatile from month to month and July’s reading bears that out. On a 12MMA y/y basis, the institutional sub-index was up 4.1%.
The continued rise in the Dodge Momentum Index indicates that the non-residential construction sector has room to grow. In July, nine projects entered planning each with a value of $100 million or more. For the institutional building sector, the leading projects were the $200 million Kaiser Permanente Medical Center in Woodbridge VA and the $200 million phase 2B of the Thompson Education Center in Rocky Hill NY. The leading commercial building projects were a $177 million Amazon fulfillment center in North Randall OH and the $170 million Pala Casino and Resort in Pala CA.
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.