COMPOSITE OVERVIEW: The PSI fell 7.1% in the week ending January 20th to close at 121.9. The latest reading brought the Index far closer to is 3-month moving average of 124.2. This latest decline was broad-based with all forms of project stress moving lower from the prior week. The saw-tooth pattern observed in recent weeks has been unusually volatile with peaks and valley readings stretching across a 14-point spread. This recent volatility appears to be the result of both year-end factors and sustained concerns around the financial challenges facing the CRE and construction spaces. During the month period ending January 20th, both delayed and on hold activity fell nearly 10% while abandoned activity climbed. Such divergent readings could foreshadow additional challenges ahead. Only since 2Q2023 has abandoned activity ever soared above the other stress measures by 30-
points or more. Furthermore, between 2020 and early 2023 abandoned activity rarely moved above a reading of 120, yet during the fourth quarter of 2023 abandoned activity readings averaged 136.6!
COMPONENTS MONITOR:
| Delay Bid Date | On Hold | Abandoned |
|---|---|---|
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. As measured by the level of abandoned projects, the early weeks of 2024 have been difficult for the private sector. During the third week of 2024 private sector abandoned activity was 70% higher compared to its same week-of-year reading from 2023. More concerning is that public sector projects appear to be facing a rising surge in abandonments in early 2024. Not only have 2024’s weekly public sector abandonment readings set week-of-year records going back to 2020, but the latest week’s (week 3) level was 65% or more above the levels set during the third week in every previous year for which data are available. This unusual surge in public sector abandonments marks a rare and unusual period for an industry that has historically been able to confidently rely on the steady flow of public construction.
The Project Stress Index (PSI) composite represents an equal-weight measure of the seasonally adjusted level of pre-construction projects that have experienced a delayed bid date, have been placed on hold, or have been abandoned in the last 30-days. The PSI monitors nonresidential and multifamily projects in their preconstruction phases only and thus excludes any single-family home construction. Each component has been seasonally adjusted and then indexed against its 2021 average weekly reading. 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 at: https://www.constructconnect.com/construction-economic-news