A difficult start to 2026 for the construction industry: crisis in the Middle East and bad weather weigh on the materials market

As the conflict in the Middle East struggles to find a solution and the risk of stalemate becomes increasingly threatening, the first effects on activity are beginning to appear, a month and a half after the start of the American military offensive in Iran.

Tensions in oil supply are causing fuel and other commodity prices (raw materials, energy) to soar, putting pressure on household budgets and production costs, including in the construction materials sector. Beyond the inflationary impact, interest rate trends are a key concern, as they pose a significant risk of stalling the housing market. The construction sector's current recovery process is not yet compromised, but these threats could weigh on construction activity in 2026 and 2027. In the materials sector, in addition to the adverse weather conditions at the beginning of the year that impacted activity, the aggregates industry will continue to be hampered by the sluggish public works market in this year of electoral cycle reversal, while demand for ready-mix concrete could benefit from the rebound in housing construction.

February, worse than January

According to preliminary data from the beginning of the year, the materials sector showed significant declines. February's aggregate production, as well as that of ready-mix concrete, reportedly fell by nearly 6% month-on-month and 8% year-on-year (seasonally adjusted data). For aggregates, the performance over the last three months (December to February) remains positive compared to the previous three months (+1%), but represents a year-on-year decline (-3,9%). In the first two months of the year, activity decreased by 4% year-on-year, with the cumulative decline over the last twelve months falling by 2,1%. For ready-mix concrete, deliveries over the last three months are struggling to stabilize compared to the previous three months (-0,8%), while they have declined more sharply year-on-year (-3,1%). Cumulatively for January and February, ready-mix concrete activity declined by a further 4,6% year-on-year, while volumes contracted by 2,7% over the past twelve months. This disappointing start to the year comes after the end of 2025 had predicted a recovery. Severe weather could largely explain this downturn. After rainfall exceeding the average in January by 30%, the average total rainfall recorded in February was more than twice the normal amount in France, making February 2026 the wettest February since 1959. This has undoubtedly had a significant impact on ongoing construction projects, suggesting that at least a partial recovery is expected in the coming months.

The materials indicator, still provisional for January, shows a decline compared to December (-2,6%, seasonally adjusted data) but has stabilized year-on-year (+0,2%). Over the last three months for which data is available, it shows a slightly negative trend both quarter-on-quarter and year-on-year, around -1%, which is the decline projected for 2025. Apart from ready-mix concrete and cement, which remain significantly lower, other materials tend to stabilize.

Housing: Construction sites rebound

While opinion polls conducted by INSEE among building professionals in recent months have suggested a stagnant and hesitant economic climate, both in terms of order books and business prospects, construction figures themselves reveal a clear rebound in activity. Indeed, according to the Ministry (SDES), at the end of February and over the last three months for which data is available, housing starts (in square meters) had climbed by 13,4% compared to the previous three months (seasonally adjusted) and by 31% year-on-year, with the growth being almost identical for both multi-family and single-family homes. Cumulatively over twelve months, the total area of housing starts has thus increased by 5% year-on-year for multi-family units and by 9,8% for single-family homes, for a total of 283.000 units, a figure that is still far below the average of the last fifteen years (367.000).

These increases, even if based on low levels, nevertheless reflect a genuine upward trend in the start of construction projects, which should ultimately translate into increased demand for materials. Currently, ready-mix concrete production, subject to various implementation delays, does not yet reflect this acceleration.

Regarding building permits, the trends remain strong, although they are slowing slightly in the multi-family sector. At the end of February, and over the last quarter, the authorized floor area for housing increased by 15,7% compared to the previous quarter (seasonally adjusted) and by 4% year-on-year. However, it is primarily the single-family home segment that is driving this trend. Nevertheless, over the last twelve months, housing permits (in square meters) are still up by 16,5%, for both single-family and multi-family dwellings, bringing the total number of permits issued over the past year to 387.944 at the end of February.

On the non-residential side, while the area of construction starts continues to grow (+5,4% year-on-year to 20,7 million m²), building permits have declined by 2,8%. Public services and retail are maintaining their upward trends, while other sectors (industry, warehouses, offices, etc.) are experiencing a marked downward shift. New construction activity in 2026 is therefore expected to be driven primarily by the housing sector. The French Building Federation (FFB) revised its outlook upwards in March to incorporate the positive impact of measures in the recently adopted Finance Law (reduction of the RLS, which consists of a €400 million decrease in the levy on social housing providers for the Solidarity Rent Reduction, and the implementation of the "Jeanbrun" scheme to support rental investment by private landlords). These measures would result in 15.000 additional housing starts by 2026 compared to the initial scenario, bringing the forecast to 308.000 homes started.

According to the French Building Federation (FFB), new construction production is expected to increase by 6% this year (compared to -8,6% in 2025), with an 11% increase in the residential sector and a 0,5% increase in the non-residential sector. The decline in sales by developers in the last quarter of 2025 suggests a more cautious approach. However, recent measures could revive rental investment projects and thus boost sales for developers. This positive trend should begin in the first half of the year, unless the geopolitical context of the Iranian conflict disrupts it. Indeed, the rise in oil prices following the blockade of the Strait of Hormuz increases production and transportation costs, puts pressure on household budgets, and exacerbates tensions in financial markets and bond yields. At the end of March, consumer prices increased by +1,7% year-on-year (compared to +0,9% at the end of February) due to the rebound in energy prices (+8,9%, including +17,1% for petroleum products alone).

As for mortgage rates, for the moment they are only rising very moderately (to 3,23% in March compared to 3,16% in December 2025*), but the risk of a sharper increase exists if the conflict drags on and threatens energy supplies. This unfavorable climate could weigh on household purchase plans, which were already showing less momentum at the beginning of 2026. According to Markemétron, the annual pace of house sales is slowing, falling from +37% this autumn to +31% in February. Finally, in the public works sector, activity at the beginning of the year, also affected by the bad weather, declined by 4,1% year-on-year in January-February. The decline in new orders continues (-12,8%) in a post-municipal election context further weakened by the international climate and cost pressures.

Materials outlook 2026

The anticipated decline in public works activity, linked to the contraction of local government investment in an election year and budget consolidation context, is expected to weigh on aggregate demand. The decrease, on the order of -1% to -2%, should be offset by a growing need for ready-mix concrete. Indeed, the acceleration of new construction should result in an increase in concrete deliveries, the magnitude of which (between 0% and +2%) remains contingent on the duration and outcome of the conflict in the Persian Gulf.