McGraw-Hill Construction launched the Dodge Momentum Index, a 12-month leading indicator of construction spending for nonresidential building. Based on a 91 percent correlation between construction planning reports, as reported by Dodge, and the Commerce Department’s Put-in-Place spending over the past 10 years, the index is an early and accurate leading indicator of future construction spending. It will prove useful to building-product manufacturers, AEC firms, construction industry professionals, economists and Wall Street analysts. The index will be issued monthly.
The predictive accuracy of the index is derived from the source of data that feeds it: the proprietary Dodge database of first-issued construction planning reports. Dodge is the sole private provider of construction starts and project data analysis to the U.S. Census Bureau, supporting the federal government’s monthly estimate of construction spending, a key input for the nation’s Gross Domestic Product (GDP). One-third of projects in the Dodge database are in the planning stage-the projects that feed the new Dodge Momentum Index.
“The strength of the new Dodge Momentum Index is that it’s based on proprietary planning data from Dodge’s national network of reporters. These are individual, real-life projects, many of which will become construction starts down the road and generate construction spending dollars,” said Kate Cassino, vice president of product development for McGraw-Hill Construction. “We have the benefit of using our world-renowned Dodge project information to create a highly accurate index, rather than relying on survey-based data.”
In designing the new Dodge Momentum Index, McGraw-Hill examined more than a decade of monthly planning data (from January 2002 to February 2012) that produced an exceptionally strong correlation of 91 percent with the Commerce Department’s nonresidential building construction put in place spending. Importantly, the analysis shows that changes in the Dodge nonresidential new planning data leads changes in Commerce spending put in place by twelve months.
Since reaching bottom in July 2011 at a level of 77.1 (2000=100), the index has trended up in all but two months. In April 2012, the Dodge Momentum Index climbed 1.0 points from the previous month to reach a level of 94.7. According to Robert Murray, vice president of economic affairs for McGraw-Hill Construction, “The relatively steady movement upward since the middle of last year suggests that construction spending put in place for nonresidential buildings should begin to move in a more consistently positive direction during the second half of 2012. This is good news for an industry that has been strongly hit by declines since the 2009 recession.”