by Calculated Risk on 4/10/2023 03:01:00 PM

From Dodge Data Analytics: Dodge Momentum Index Drops in March

The Dodge Momentum Index (DMI), issued by Dodge Construction Network, slipped 8.6% in March to 183.7 (2000=100) from the revised February reading of 201.0. In March, the commercial component of the DMI fell 6.6%, and the institutional component decreased 12.9%.

“We are predicting the Dodge Momentum Index to work its way back to historical norms throughout 2023, concurrent with weaker economic conditions,” stated Sarah Martin, associate director of forecasting for Dodge Construction Network. “Lending standards for small banks in particular have substantially tightened as banking insecurity intensifies. As a result, owners and developers are more likely to pullback in the short-term, which would further contract the DMI as we continue into the year.”

Commercial planning in March was driven down by less projects in the office and warehouse sectors, decreasing 29% and 11%, respectively. Institutional planning weakened more substantially, as healthcare fell 17%, education dipped 6%, and amusement planning activity dropped 14%. On the upside, however, a steady flow of research and development laboratories entered the queue, supporting the otherwise weakening sector. Year over year, the DMI remains 24% higher than in March 2022. The commercial component was up 37%, and the institutional component was 2% higher.
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The DMI is a monthly measure of the initial report for nonresidential building projects in planning, shown to lead construction spending for nonresidential buildings by a full year.
emphasis added

Click on graph for larger image.

This graph shows the Dodge Momentum Index since 2002. The index was at 183.7 in March, down from 201.0 the previous month.

According to Dodge, this index leads "construction spending for nonresidential buildings by a full year".  This index suggests a solid pickup in commercial real estate construction in 2023. but a slowdown towards the end of 2023 or in 2024.  

As Ms. Martin previously noted, commercial construction is a lagging economic indicator.