Economy Watch: Construction Industry Sees September Slowdown

September's decline in nonresidential building projects follows five consecutive months of gains, according to a Dodge Data & Analytics report.
Source: Dodge Data Analytics

Source: Dodge Data & Analytics

The Dodge Momentum Index dropped 4.3 percent in September to 129.0 from a revised August reading of 134.8 (2000 = 100), according to the construction industry data specialist Dodge Data & Analytics in a recent report. 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 year.

September’s decline follows five consecutive months of gains for the Momentum Index, and resumes (for now) the up-and-down pattern that’s often been the case since 2014. The decline in September was the result of a 5.3 percent drop in institutional planning and a 3.6 percent decrease in commercial planning, a contrast with the strong performance in August that benefited from an influx of large projects ($100 million or greater) into planning.

Even with the recent volatility on a month-to-month basis, the Momentum Index continues to trend higher, meaning that developers have moved plans forward despite economic and political uncertainty. Year-over-year, the Momentum Index is 5.1 percent higher than one year ago. Its institutional component is 5.4 percent above its September 2015 reading, while the commercial component is up 4.9 percent.

In September, five projects entered planning each with a value of more than $100 million. For the commercial building sector, the leading projects were a $200 million office tower in Chicago and a $150 million JW Marriott Hotel in Irvine, Calif. The leading institutional projects were a $150 million hospital in Evanston, Wyo., and a $105 million hospital in Salt Lake City.