According to ConstructConnect’s Project Stress Index (PSI), even though more construction projects were held up last month, there were fewer that were abandoned altogether, which is an encouraging sign.

ConstructConnect’s composite represents an equal-weight measure of the seasonally adjusted level of preconstruction projects that have experienced a delayed bid date, have been placed on hold or have been abandoned in the last 30 days.

The PSI on May 4 closed at 123.7, which was a slight rise of 20 basis points, or 0.2%, from a month earlier. During that time, projects placed on hold rose 10.1%, while abandoned projects fell 6.7%. Projects whose bid dates were delayed fell by 0.4%.

“While the PSI continues to trend within a narrow range of between 120 and 130, we are encouraged by the recent fact that abandonment activity has declined to near-year-low levels in recent weeks despite this improvement being offset by activity related to projects put on hold,” wrote Michael Guckes, ConstructConnect’s senior economist.

The difference between the “stress trends” of private projects from those of public projects is marketable, not surprisingly because their sources of funding differ, Guckes wrote.

“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,” he wrote. “Public projects fared far better in 2022 and early 2023, thanks partly to a wave of federal stimulus spending legislation.”

The decline in abandoned projects in recent weeks has been observed across both sectors, according to Guckes. Since reaching their respective February highs, the level of abandonments has fallen between 20% and 30% in each sector.

“However, because of the generally more difficult conditions being experienced in the private sector, current private abandonment activity remains 36% above 2021’s baseline level,” he wrote. “In comparison, the latest public sector activity reading was only 7% above its 2021 baseline.”

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. 

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