ConstructConnect’s Project Stress Index reading for July has experienced a sharp decline of 14.2% and is now at 96.2, following June’s revised reading of 112.5. Compared to levels from a year ago, the Index has fallen 6.1%.

Last month saw decreases across all stress components, with abandonment activity experiencing the most severe monthly decline, which was a 24% fall. This was followed by an 11% dip in on-hold activity and delayed bid activity, which fell 6.8%.

ConstructConnect attributes the abrupt and steep shift to an anticipated reduction of interest rates by the Federal Reserve.

As said by ConstructConnect Chief Economist Michael Guckes, “If owners and developers believe they need only wait a few more weeks—or just a few months at worst—for lower interest rates, then they would be correct in thinking that now is not the time to abandon or put projects on hold. Why abandon a project now if, in just a few weeks, falling commercial real estate mortgage rates will make that project financially viable? Indeed, it would seem that a brief “wait and see” approach makes the most sense.”

While public and private projects tend to exhibit different trends, both sectors last month benefited from the factors that drove the stress declines. ConstructConnect’s data revealed that two-thirds of the decline in abandonment activity occurred in the private sector, while nearly all of July’s fall in on-hold activity was seen in the public sector. And, about four-fifths of the dip in bid date delayed activity was experienced in the public projects.