By: Michael Guckes, Chief Economist on May 13, 2024
ConstructConnect's Project Stress Index - May 13, 2024
Read this article to understand the level of U.S. non-residential construction projects that have been delayed, on hold, or abandoned.
COMPOSITE OVERVIEW
For the week ending May 11th, 2024, the Project Stress Index composite closed at a four-month low of 115.6, down 4.5% from last week’s revised reading and down 9.8% from a month ago.
Last week’s reading was revised lower due to a decline in abandonment activity. Excluding this revision, the weekly Index change would have been down 6.5%. The last time the Index was below its current level was during the first week of 2024.
If future readings continue at or below this current level, it will mark the end of three consecutive months of stagnant readings during which the Index moved within a narrow range between 120 and 130. During that time, the Index was initially supported by heightened Abandonment activity, which declined only to be offset by rising On Hold activity, which sustained the Index.
In contrast, Abandoned and On Hold activity fell significantly in the latest week.
COMPONENTS MONITOR
Delay Bid Date | On Hold | Abandoned |
---|---|---|
(Week-on-week changes of less than 0.25% are indicated as unchanged)
Sector Status Update
Due to their disparate financing sources, public and private projects often exhibit distinct stress trends. Six months after the Federal Reserve initiated interest rate hikes in early 2022, conditions for private sector projects deteriorated noticeably, as evidenced by a significant increase in abandonments beginning in mid to late 2022.
Public projects fared far better in 2022 and early 2023, partly thanks to a wave of federal stimulus spending legislation. Public sector abandonment activity continues to subside from its late 2023 highs. This week’s level of public sector abandonments fell to its second-lowest level in 2024 and below its “base year” reading using 2021 data.
Although private-sector abandonment activity also fell for the week, it remains 34% above its base year level. In contrast, the situation is reversed when examining bid date delayed activity. Public sector activity is 20% above its base year level, while in the private sector, comparable activity is currently only marginally higher relative to 2021.
About the Project Stress Index
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 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.