Wednesday, August 08, 2018

Leading Index for Commercial Real Estate Increases in July

by Bill McBride on 8/08/2018 08:27:00 PM

Thursday:
• At 8:30 AM, The initial weekly unemployment claims report will be released.  The consensus is for 220 thousand initial claims, up from 218 thousand the previous week.

• Also at 8:30 AM, The Producer Price Index for July from the BLS. The consensus is a 0.3% increase in PPI, and a 0.3% increase in core PPI.

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 Increases in July

The Dodge Momentum Index moved 1.4% higher in July to 169.8 (2000=100) from the revised June reading of 167.3. 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. In July, the commercial component of the Momentum Index grew by 3.3%, while the institutional component fell 1.5%. The headline Momentum Index has risen steadily since its slippage during the third quarter of 2017. Stronger economic growth and the support from still-healthy real estate market fundamentals (occupancies and rents) have contributed to these gains for construction projects at the planning stage, which have yet to be restrained by the uncertainty arising from higher material costs and higher interest rates.
emphasis added
Dodge Momentum Index Click on graph for larger image.

This graph shows the Dodge Momentum Index since 2002. The index was at 169.8 in July, up from 167.3 in June.

According to Dodge, this index leads "construction spending for nonresidential buildings by a full year". This suggests further growth into 2019.