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Electrical Marketing's Leading Indicators: Sept. 25, 2020 Update

Sept. 24, 2020

August single-family permits increase +6%. Privately-owned housing units authorized by building permits in August were at a seasonally adjusted annual rate of 1,470,000, -0.9% below the revised July rate of 1,483,000 and -0.1 % below the August 2019 rate of 1,471,000, according to the U.S Census Bureau. Single-family authorizations in August were at a rate of 1,036,000, +6% above the revised July figure of 977,000.

PMI moves into growth territory. The August PMI registered 56%, up +1.8% from the July reading of 54.2% percent. The August figure is the best reading from the Institute for Supply Management’s monthly Purchasing Managers Index survey of industrial purchasing managers since Jan. 19. Any number over 50 indicates a growth environment in the industrial market.

Dodge Momentum Index sees some growth in August. The Dodge Momentum Index increased +1.8% in August to 126.5 (2000=100) from the revised July reading of 124.2. The Momentum Index, issued by Dodge Data & Analytics, 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. In August, the commercial component rose +3.3%, while the institutional component dropped -1.2%.

Dodge said the August increase in the overall Momentum Index is the second consecutive rise and a further sign that the construction sector continues to post a modest recovery following the large declines in April and June.

This recovery, though, is uneven. The commercial component has risen +9% from its June low and is just -13% below its 2018 peak fueled by increased planning activity for warehouse and office projects. The institutional component, however, has declined for five consecutive months and has yet to hit bottom. The institutional component is now -34% below its recent peak. The public side of the building market is suffering as state and local government revenues have declined, creating budget cuts across the country. This has led to a significant pullback in education projects entering planning, placing substantial downward pressure on the institutional component of the Momentum Index.