Construction activity saw a sharp increase in project stress last month, reversing recent declines, according to the latest data from Cincinnati-based ConstructConnect.
The Project Stress Index, a measure of construction projects that have been paused, abandoned or have a delayed bid date, jumped 14.7% in November. Despite this uptick, the index remains below its post-COVID peak and sits 5% lower than where it began 2024, said Michael Guckes, chief economist at ConstructConnect.
“The index has merely unwound the drop in stress conditions that was initiated in the months just before the Fed’s rate cutting began,” said Guckes. “Now, with the election results known, new concerns around higher inflation and the loss of migrant construction labor may be souring the mood of owners and developers.”
The spike came despite an expected additional rate cut after the Fed’s Open Market Committee meeting wraps on Wednesday.
Rising on-holds and abandonments
Both on-hold and abandoned projects levels surged significantly over the past month, according to the data.
Project put on-holds jumped 29.4%, while project abandonments spiked 31.9%.
The reversal brings conditions back to levels seen before the Federal Reserve began cutting rates in September. That suggests renewed caution among owners and developers, said Guckes.
“November’s results saw a significant rebound in on-hold and abandoned activity from the historic lows of recent months,” said Guckes. “This could be a signal that the market was overly optimistic about what the Federal Reserve was willing to do.”
The pattern of volatility may hold until regulatory conditions begin solidifying in 2025, said Guckes. He added trade disruptions between the U.S., Canada and Mexico due to proposed tariffs could further impact pricing and availability of critical construction resources.
Delayed bid activity remained largely unchanged, ticking down 0.2% in November.
Short-term spike but long-term improvement
The sharp uptick in November contrasts with a more positive trend over the past year. Year over year, stress levels still show improvement, according to ConstructConnect.
That difference in timeframes — with recent stress levels ticking up but improving compared to a year ago — reflects lingering uncertainty, said Guckes.
The number of public and private projects on-hold posted nearly no change compared to November 2023. Abandonments in the private sector dropped 20% over the past 12 months, according to the report.
“Both sectors have seen a reduction in the number of abandonments since the Fed began lowering interest rates,” said Guckes. “If this change holds, it could signal that developers are willing to be patient in the hopes of yet further rate cuts.”
