Dodge Index Increases in December 2012

The Dodge Momentum Index rose 3.2 percent in December, according to McGraw-Hill Construction, a division of The McGraw-Hill Cos. 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.

The December gain brought the Momentum Index to 94.9 (2000=100), up from November’s revised 91.9. After showing a hesitant upward trend during the first seven months of 2012, the Momentum Index settled back from August through October and then stabilized in November. This coincided with the economic and political uncertainty that dampened investment during that time. The December rebound for the Momentum Index brings it back close to the 95.4 reached in July, which was the highest reading reported during 2012. The latest month’s upturn may also be the initial sign that the uncertainty that restrained plans for construction is now easing, with the November 2012 elections now final and the fiscal cliff being averted for the time being.

December’s increase for the Momentum Index was due entirely to a pickup by its commercial building segment, which advanced an impressive 9 percent relative to November. New plans for stores and office buildings were stronger in December, and several notable warehouse developments also bolstered the index, including plans for two new Amazon distribution facilities in Dupont, Wash., and Fort Worth, Texas. In contrast, the institutional building segment of the Momentum Index dropped 2.4 percent in December, weighed down by a reduction in the number of new hospitals entering the planning phase. The retreat for the institutional building segment is likely to continue for a while longer, given expected cutbacks in federal spending and state budget constraints.

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