Monday, October 09, 2017

Leading Index for Commercial Real Estate Declines in September

by Bill McBride on 10/09/2017 08:11:00 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 Declines In September

The Dodge Momentum Index fell in September, moving 8.4% lower to 116.4 (2000=100) from the revised August reading of 127.1. 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. Both components of the Momentum Index declined in September. The institutional building component fell 11.5% from August, while the commercial building component fell 6.1%. While the overall Momentum Index has lost ground for four consecutive months, this should not be seen, in and of itself, as a predictor of a turn in building markets. 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. 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.
emphasis added
Dodge Momentum Index Click on graph for larger image.

This graph shows the Dodge Momentum Index since 2002. The index was at 116.4 in September, down from 127.1 in August.

The index is down 4.6% year-over-year.

According to Dodge, this index leads "construction spending for nonresidential buildings by a full year". This suggests some softness in CRE spending next year.