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Construction market stress increased despite a sharp drop in project cancellations, according to the latest report from Cincinnati-based ConstructConnect.
Dropouts fell 49.8% in September, according to the report ConstructConnect Project Stress Indexa measure of construction projects that have been stopped, abandoned or have a delayed bid date.
But despite the good news about fewer quits, the number of people out of work rose 9.8% last month. According to the report, this led to the overall 16.7% increase in the project stress index over the past 30 days.
“While [September’s PSI increase] is a significant month-on-month increase, August’s reading was revised downward, representing a three-year low,” said Michael Guckes, chief economist at ConstructConnect. “We should also remember that the index has had a very low trend in most months of 2024. Only compared to an all-time low, September’s reading looks exceptionally high.”
Although September’s reading was considerably higher than in recent months, the latest results are within historical norms, Guckes said.
The private sector saw significant improvements, with a 9.4% drop in project abandonments compared to the same period in 2023, according to ConstructConnect. Meanwhile, stalled projects fell 6.8 percent year over year, reflecting growing confidence in stabilizing market conditions, Guckes said.
Backlog activity was almost flat with a 0.1% decline, according to the report.
However, while optimism around lower interest rates is starting to ease the stress on the construction market, the impact of high borrowing costs still lingers. For example, weak demand in certain sectors and financing conditions continue to affect the global spending activity in private construction.
Public projects also saw reduced stress levels, with stalled projects and abandonments falling 17.6% and 5.5% compared to the same period last year, respectively, according to ConstructConnect.
“Both sectors appear to be benefiting from falling interest rates and a positive global outlook for the economy, and many believe a soft landing is within reach for the Fed,” Guckes said . “Project stress index results from the past few months appear to be moving forward with these broader sentiments. This broad optimism appears to be driving down public and private sector stress readings.”
