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ConstructConnect's Project Stress Index - February 26 Blog Feature

By: Michael Guckes, Chief Economist on February 26, 2024

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ConstructConnect's Project Stress Index - February 26

COMPOSITE OVERVIEW: For the week ending February 24th, 2024, the Project Stress Index composite fell 0.6% to close at 129.0. The latest results were slightly lower than the prior week. Delayed Bid and Abandoned project activity fell by 3.3% and 0.2% for the week, respectively. In contrast, On hold activity increased by 1.2% from week-ago levels. In recent weeks, the Federal Reserve has made it clear that it intends to lower interest rates at a much slower pace than financial markets were led to believe around the start of the year. The consequences of a higher rate environment throughout 2024 will mean smaller expected returns on financed commercial real estate projects which could result in more projects experiencing some form of project stress as measured by the PSI. While much of this stress has likely been captured in recent weeks of volatile results, there remains the possibility that more stress is to come as existing commercial real estate (CRE) properties continue to fall in value, influencing the buy-vs-build equation for potential owners and developers of new CRE properties.



COMPONENTS MONITOR:

Delay Bid Date On Hold Abandoned

psi-26

Sector Status Update: Public and private sector project stress results can and do, at times, trend independently of one another in part due to their different funding mechanisms. In both the private and public sectors, the latest weekly results pointed to a decline in the level of projects that experienced a delayed bid date for the first time this year. While this is encouraging news, these declines are being offset by rising levels of On hold and Abandoned events. In the latest weekly results, public sector project abandonments hit their highest level thus far in the year. In both sectors the number of abandoned projects has set week-of-year records going back to at least 2020 in every week this year.

 

About the Project Stress Index

The Project Stress Index (PSI) monitors the level of U.S. construction projects, excluding single family residential, that have experienced a bid date delay, have been placed on hold, or have been abandoned over the last 30 days. Each component has been indexed against the average of their weekly values recorded during 2021. The independent tracking of each status type gives unique insights into the timing, direction, and amplitude of market changes.

Additional information about the PSI, including detailed data about the individual readings for delayed, on hold, and abandoned projects can be found here.

About Michael Guckes, Chief Economist

Michael Guckes is regularly featured as an economics thought leader in national media, including USA Today, Construction Dive, and Marketplace from APM. He started in construction economics as a leading economist for the Ohio Department of Transportation. He then transitioned to manufacturing economics, where he served five years as the chief economist for Gardner Business Media. He covered all forms of manufacturing, from traditional metalworking to advanced composites fabrication. In 2022, Michael joined ConstructConnect's economics team, shifting his focus to the commercial construction market. He received his bachelor’s degree in economics and political science from Kenyon College and his MBA from the Ohio State University.