Recently released new construction metrics show mixed monthly results, variations by sectors, and positive projections through 2023 and 2024.
DMI
The Dodge Momentum Index (DMI), issued by Dodge Construction Network, fell -2% in May to 180.5 points (2000=100) from the revised April reading of 184.1 points. Over the month, the commercial component of the DMI fell -6.1%, while the institutional component improved +5.6%. Research & development laboratories and hospital projects steadily entered planning. The index remains above the historical average. The forecast looks better for non-residential construction in mid-2024, as the economy recovers and the Fed begins to reduce rates. The DMI is a monthly measure of the initial report for nonresidential building projects in planning, which leads construction spending for nonresidential buildings by a year.
AIA/Deltek Architectural Billings Index (ABI)
The ABI is a 9-12 month leading indicator for non-residential construction. Business conditions at architecture firms bounced back in May, following a modest downturn in April. The AIA/Deltek Architecture Billings Index (ABI) score for the month was 51.0, the highest it has been since last September. In addition, inquiries into new projects and the value of new design contracts also bounced back this month, with inquiries reaching their highest level in nine months, and design contracts increasing for the first time since February. With recent declines in inflation and a pause in interest rate increases, it appears that the economy may be stabilizing.
US Census Bureau
Construction spending during April 2023 was estimated at a seasonally adjusted annual rate of $1,908.4 billion, 1.2 percent above the revised March estimate of $1,885.0 billion. The April figure is 7.2 percent above the April 2022 estimate of $1,780.9 billion. During the first four months of this year, construction spending amounted to $566.7 billion, 6.1 percent above the $533.9 billion for the same period in 2022.
Capstone Partners May 2023 Construction Services Sector Update
The Capstone Partners May 2023 Construction Services Sector Update reported elevated construction spending, increased project backlogs, and continued employment growth have driven acquisition activity. Macroeconomic headwinds have challenged the Construction Services space. Sector participants have remained optimistic in their outlook for operating performance, notably contractors expect growth in sales, profit margins, and staffing over the next six months. These projections have been supported by healthy construction spending, which increased by 5.8% year-over-year (YOY) as of January 2023.
ABC’s CBI & CCI
Associated Builders and Contractors (ABC) reported that its Construction Backlog Indicator (CBI) remained unchanged at 8.9 months in May, according to an ABC member survey conducted May 20 to June 7. The reading is 0.1 months lower than in May 2022.
ABC’s Construction Confidence Index (CCI) reading for sales and staffing levels moved lower in May while the reading for profit margins increased. All three readings remain above the threshold of 50, indicating expectations of growth over the next six months. CBI quantifies the previous month’s work under contract based on the latest financials available, while CCI measures contractors’ outlook for the next six months.
Top image: Dodge Construction Network
Image: US Census Bureau
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