Construction Stress Declines in July, but Industry Braces for Ongoing Challenges

The U.S. construction industry got a welcome reprieve in July as project stress levels dropped sharply, according to new data from Cincinnati-based ConstructConnect. The firm’s Project Stress Index — which tracks projects that have been paused, abandoned, or delayed — fell 24.3% from June to July, marking one of the steepest month-to-month improvements in recent years.

A major driver of the improvement was a 37.1% decline in project abandonments, which have been a persistent concern for both public and private sector builders. Bid delays also fell by 4%, while projects placed on hold dropped 15.5%, easing pressure on contractors already contending with high material prices and elevated borrowing rates.

Private sector projects saw the most significant gains, with bid delays nearing historic lows and on-hold activity settling near long-term averages. “We typically see abandonment activity trail off after the first half of the year,” said Devin Bell, associate economist at ConstructConnect. “July has broken this trend with both sector abandonments near historic highs as we enter the second half of the year.”

However, Bell cautioned that despite the July improvement, overall stress remains 14.1% above the 2021 baseline, and is still 25.9% higher year-over-year. In the public sector, abandonment activity is up a staggering 76.7% compared to last year, and projects on hold ticked up 2.1% from July 2024.

Industry layoffs in recent months underscore the lingering challenges. Pittsfield, Massachusetts-based Unistress Corp. and its subsidiary Berkshire Concrete Corp. cut 233 workers in late June due to delays in two major contracts, a decision Unistress CEO Perri Petricca linked to volatile steel prices.

The impact of global trade policy and rising financing costs has also been felt by large contractors. Irving, Texas-based Fluor Corp. recently reported project delays and cancellations in its backlog, citing cost escalation, shifting trade policies, and interest rate pressures. CEO Jim Breuer told investors the market has entered a period of “short-term hesitation.”

“The volatile economic environment continues to weigh on the construction market,” Bell said. “[That’s] potentially pushing some owners and developers toward abandonment.”

Economists say that while the July slowdown in project stress is encouraging, the industry remains highly sensitive to interest rate changes, supply chain disruptions, and material price volatility — particularly in commodities like steel, copper, and concrete. Contractors are also navigating a tight labor market, where skilled worker shortages can amplify delays and cost overruns.

Public sector work, often reliant on fixed budgets, remains especially vulnerable to inflationary pressures. Even with infrastructure funding from federal and state sources, municipal governments are struggling to adjust project scopes without exceeding budgets.

If interest rates begin to decline later this year, analysts expect a gradual rebound in construction starts. However, for now, many developers are adopting a cautious “wait-and-see” approach before committing to large-scale investments.

Originally reported by Sebastian Obando in Construction Dive.