Project Stress Index
What is the Project Stress Index™ (PSI) report?
The Project Stress Index report tracks preconstruction projects that have been delayed, abandoned, or placed on hold over the last 30 days. The report is an early indicator of possible headwinds for the U.S. construction market.
What data is used to calculate the Project Stress Index report?
The data used to calculate the composite reading in the Project Stress Index report includes the count of projects that have experienced a delayed bid date, have been placed on hold, or have been abandoned in the last 30 days. The underlying data and calculation methodology are exclusive properties of ConstructConnect.
The underlying data collectively monitor nonresidential building, heavy engineering (civil), and multifamily residential projects in the preconstruction stage. The data does not include single-family home construction and maintenance contract work.
Each component has been seasonally adjusted and then indexed against its 2021 average weekly reading.
Project status definitions:
Bid Date Delayed - The bid date has been pushed back, but all indications are that the project will otherwise proceed. Many events, such as a delayed permit, can prompt a bid date delay. This is the most common but least severe form of a project stress event.
On Hold - The timeline has been delayed for an unspecified amount of time. The project could be re-engaged next quarter, next year, or even further out. This is the second most severe form of project stress, occurring in approximately 1 out of every 6 stressed projects.
Abandoned - There is no further expectation that the project will advance through its preconstruction stages or into physical construction. Fewer than 1 in 20 stressed projects are abandoned.
The combined use of a 30-day rolling count and weekly data measurements allows the PSI report to give rapid notice of a change in market conditions while also reducing the volatility, or "noise," typical with high-frequency metrics.
The independent tracking of each status type gives unique insights into the amplitude, or severity, of market conditions, up to and including the possibility of a severe market correction.
What projects are in the planning phase?
Projects in the preconstruction planning phase have not yet gone to bid/tender and may be in any design phase, from pre-design to schematics to construction documents. Projects in the PSI data are in the planning through the bidding stage of preconstruction.
How is the Project Stress Index report calculated?
Each month ConstructConnect sums the number of projects in each stress category (bid date delayed, on hold, abandoned). Each sum is then seasonally adjusted and indexed to a 2021 baseline. The average of these three series provides the composite reading featured in the report.
What does the Project Stress Index report suggest about industry conditions?
The PSI report answers many important preconstruction questions, including: Are more or fewer projects reaching vertical construction? Which types of projects are more frequently failing to reach construction? Using this information can help firms anticipate unexpected revenue disruptions, keep their crews busy, and keep their company profitable.
Does the Project Stress Index report correlate to other economic conditions?
An independent Harvard University analysis found statistical evidence of the following correlations with the report's composite reading.
As the composite reading increases:
• The dollar level of construction activity decreases.
• Construction unemployment increases.
• The average hours worked by construction laborers decrease.
• Construction wages decrease.
How does the seasonal behavior of each PSI component affect the report's composite reading?
The raw count of delayed, put on hold, and abandoned projects each exhibits an annual seasonal pattern. (The following description of the seasonal movement in the count of bid date delayed projects can be used generally to depict the movement of on-hold and abandoned project counts as well.)
The count of bid-date delayed projects typically rises quickly during the first two months of the calendar year until reaching a climax near June.
Afterward, the count of impacted projects begins a slow descent through the third quarter. In the final weeks and months of each year, the count of delayed projects falls in accordance with slowing construction activity, often caused by winter weather conditions.
All PSI results are seasonally adjusted before publication, providing a clearer view of nonseasonal trends and cyclical data that would otherwise be overshadowed by seasonal difference.
Can we identify the data market sectors that are more or less affected by this stress indicator (e.g., educational, government, industrial, retail, residential, etc.)?
No, the PSI report tracks nonresidential, heavy engineering, and multifamily construction without distinction. The underlying Index data only allows for breakouts of public and private-sector projects; however, these sector results are not seasonally adjusted.
Is there a forecast in the Project Stress Index report?
No. All PSI figures and analytics are historic-looking.
What is the Delayed to On Hold to Abandoned Projects ratio?
Historically, for every identified abandoned project, ConstructConnect identifies approximately eighteen delayed bid projects and four projects on hold.
Which time intervals are most appropriate when comparing data from different periods?
The figures reported in the PSI report reflect activity over the past 30 days and are seasonally adjusted. This means that users of the report can compare monthly figures against one another, keeping in mind that all values are calculated against a 2021 baseline (2021 = "100").