The recovery of the construction materials market is confirmed but with new uncertainties

Donald Trump's return to power and the implementation of trade protectionist measures, combined with Russia's more aggressive stance in the Ukrainian conflict, have had the effect of, on the one hand, disrupting the balance in the financial markets and, on the other, making European governments aware of their military fragility and the importance of defense budgets. This troubled international context inevitably introduces more volatility and tensions in terms of bond yields and inflation. While the latest economic growth forecasts have been slightly adjusted downward, they do not foresee a major inflationary or recessionary impact. On the real estate market side, the risks of higher interest rates and a more wait-and-see attitude from households cannot be ruled out, even as a certain recovery was beginning to emerge. For now, positive signals are multiplying (construction starts, new-build transactions, loan applications, housing incentives, continued activity in public works, etc.), leading in their wake to a gradual recovery in the materials sector. But 2025 opens with new uncertainties and threats that must be closely monitored...

Key figures

Positive developments in materials over the last three months: +3,9% (aggregates), +0,2% (BPE) compared to the previous quarter.

A pretty decent January

The first available estimates for January tend to confirm the recovery in materials. On the aggregates side, volumes were down -1,3% compared to December but are up +4,9% compared to January 2024, which, as a reminder, was rather negatively oriented (CVS-CJO data). Over the last three months, from November to January, activity shows an increase of +3,9% compared to the previous three months but also to the same period a year ago. Cumulatively over the last twelve months to the end of January, the decline in volumes amounts to -3%, compared to -4,1% for the whole of 2024. Regarding ready-mixed concrete, deliveries also fell in January, by -3,9% compared to February and by -2,5% year-on-year (CVSCJO data). But the pace of decline is moderating: over the past three months, BPE activity has returned to a very modest positive position compared to the previous quarter (+0,2%), while it has "only" declined by -5,2% year-on-year. Over the twelve-month rolling period, to the end of January, production has still contracted by -10,4%, compared to -11,6% for the year 2024.

This recovery movement is also observed among the other materials in the mineral sector. In December, our indicator certainly fell compared to November (-1,7% to 85,2) but it shows an increase of +0,7% between the third and fourth quarters (CVS-CJO data). The quarterly activity of the basket of materials remains, however, down year-on-year (-2,1%), a more moderate trend than that observed over the whole of 2024 (-6,5%). While all the materials in the basket share this movement, the rates of decline observed in 2024, for their part, diverge significantly, with a factor varying from 1 to 8 (from -2,3% for cut stone to -18,3% for tiles and bricks).

Building: a clearing

According to the latest survey conducted in March by INSEE among construction professionals, the business climate has stopped deteriorating, with the composite indicator remaining at 98 below its long-term average (100). In the structural work sector, business leaders are a little less pessimistic about their future activity and their order books have rebounded to 9,1 months of construction (compared to 8,7 in February), a duration that should nevertheless be assessed in light of the workforce, which has tended to contract in recent months. However, the rebounds in the production capacity utilization rate (to 88,7% compared to 87% in February) and the share of contractors encountering production constraints (to 35,4% compared to 32,7% in February) tend to confirm that activity is trembling in the structural work sector; a diagnosis that is confirmed by the recovery in the balance of opinion on future activity and the expected evolution of the workforce in this segment. On the construction side, in the non-residential sector, the number of started spaces continued to decline at the end of January (-3,5% year-on-year over the last three months and -7,5% cumulatively over twelve months) while permits are recovering (+13,3% and +1,8%, respectively), particularly in the industrial, agricultural and public services sectors. As for housing, while authorizations are still lacking strength (-6,2% over three months and -11,4% cumulatively over twelve months), the data on housing starts, recently revised by the ministry, show a strong increase. Thus, at the end of January and over the last three months, housing starts jumped by +16,8% compared to the previous three months (CVS-CJO data), bringing the cumulative rolling twelve-month figure down by -1,3%, to 294.500 housing units. This rebound concerns both collective housing (+6,7% cumulative twelve months to the end of January, or 148.000 apartments) and individual housing (+4,2%, or 97.000 houses) and residential housing (+22,8%, or 39.500 units).

While this surge probably reflects an improvement in the economic situation, it is also probably partly explained by the CDC and Action Habitat housing buyouts (47.000 in total) initiated in 2024 to support the real estate development sector. Moreover, the situation in the individual segment remains contrasted between the "grouped" housing starts, which increased by +10,5% (38.300) and the "diffuse" housing starts, which contracted by a further -26,1% (68.700 houses started). However, activity continues to improve in this sector, according to the latest data on individual home builders published by Markemétron. At the start of 2025, the recovery in sales was confirmed with an increase of +30,1% in January over one year and +29,4% measured over the last three known months (from November to January); a rebound which comes, it is true, after a historic fall (-66,6% between 2021 and 2024) and which brings the cumulative decline in activity over twelve months (8,5 sales) down to -51.700%. The fall in housing interest rates (3,19% in February according to the Observatoire du Crédit Logement) combined with a dynamic banking offer have helped to revive the market and demand for credit, particularly in new construction. Thus, at the end of February, cumulatively over twelve months, credit production increased by +14,3% over one year (compared to +4,2% in 2024) while the number of loans granted climbed by +40,2% (compared to +35,8% in 2024). The support measures contained in the 2025 Finance Act, which are expected to come into effect on April 1, 2025 (extension of the PTZ (Loan Interest Rate) – the impact of which is estimated at a surplus of 15.000 housing units this year –, tax exemption for donations, simplifications, etc.) should help sustain the movement. However, certain factors could weaken the recovery: in a context of fiscal consolidation, growth prospects are weak for 2025 (+0,7% according to the Banque de France), unemployment is rising, and the climate of uncertainty linked to geopolitical unrest (the Russo-Ukrainian conflict, the trade war triggered by Donald Trump, etc.) could lead economic agents to favor a wait-and-see approach. Household home purchase intentions, measured by the INSEE survey, also moderated in February. The rise in bond yields, resulting from tensions in the financial markets, could jeopardize the ECB's pursuit of a more accommodative monetary policy and halt the improvement in credit conditions. At this stage, the worst-case scenario favored by economic institutes is not the one favored, and an acceleration in growth is still expected in 2026-2027, but the risks weighing on activity in 2025 cannot be dismissed.

TP: start of 2025 in line with 2024

According to the survey conducted by the FNTP in January, the volume of work carried out increased by +2,2% compared to December and by +3,4% compared to last year (CVS-CJO data), thus continuing the trend for 2024. Order intake also increased, showing an increase of +1,7% over one month and +17,1% over one year, also reflecting a level comparable to that of 2024 (-0,9% compared to the twelve-month average). One year before the end of the electoral cycle, an acceleration could have been "legitimate" but the sector seems to be just maintaining the momentum of 2024, with cuts in budgetary appropriations (2025 Finance Act), although more moderate than initially planned (-€2,2 billion compared to -€5 billion), weighing on the dynamics of local investment, particularly in the departments.

Illustrative image of the article via Depositphotos.com.