Oct. 9, 2017
The Dodge Momentum Index is at its lowest level in over a year and a half after a step back in September. The index from Dodge Data & Analytics fell 10.7 points (8.4%) last month, which is the fourth straight month of declines. The current reading is at 116.4, down from the revised August reading of 127.1.
The index is a construction spending predictor in the nonresidential sector. It measures first reports of nonresidential building projects in the planning stage. The index is at its lowest level since February 2016, said Wells Fargo Securities. “Tighter lending standards and leaner public sector budgets have weighted on construction spending recently, but solid economic growth should help support activity going forward,” Wells Fargo explained.
The institutional building component dropped 11.5% in September, while commercial building fell 6.1%. The recent setbacks in nonresidential construction spending, as determined by the index, should not be a cause for alarm. “Prior to the previous peak of the Momentum Index in January 2008, it had suffered similar significant declines, only to rebound and post strong gains in subsequent months in line with overall economic growth,” said the release from Dodge. “Similarly, the Momentum Index posted healthy gains from late 2016 through early 2017. Economic growth remains solid, and building market fundamentals are supportive of further growth in construction activity.”
There were 10 projects valued at $100 million or more than entered planning in September. They included a $200 million office complex in San Jose, California, and a $200 million mall in Staten Island, New York, in the commercial building sector. Large institutional projects included a $400 million civic complex in Los Angeles and a $100 million casino in Washington.
– Michael Miller, editorial associate