Thursday, July 13, 2017

Leading Index for Commercial Real Estate Increases in June

by Bill McBride on 7/13/2017 08:56:00 AM

Note: This index is possibly a leading indicator for new non-residential Commercial Real Estate (CRE) investment, except manufacturing.

From Dodge Data Analytics: Dodge Momentum Index Moves Higher in June

The Dodge Momentum Index took another step forward in June, increasing 1.1% to 141.1 (2000=100) from its revised May reading of 139.6. 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. June’s lift was due to a 4.8% advance by the institutional component of the Momentum Index, while the commercial component fell 1.3%. The Momentum Index has exhibited substantial strength since mid-2016, with the institutional and commercial components trading off as the driver of growth almost on a month-to-month basis. Although the commercial component of the Momentum Index declined in the latest month it is 11.8% higher than it was in June 2016, while the institutional component is 9.5% above a year ago. The overall rising trend for both sectors continues to suggest that construction activity will remain healthy through the end of the year.
emphasis added
Dodge Momentum Index Click on graph for larger image.

This graph shows the Dodge Momentum Index since 2002. The index was at 141.1 in June, up from 139.6 in May.

The index is up solidly year-over-year.

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.