A return to school between uncertainties, hope and concerns for the construction materials sector

A year ago, the macroeconomic environment was threatened by soaring costs and energy, accelerating inflation, supply pressures and rising interest rates.

These factors weighed heavily on household demand but business activity remained fueled by backlogs of orders (restrained by the pandemic shock), generating labor needs. The 2023 school year opens with new concerns. Inflation is moderating and the rise in rates is soon coming to an end, but their effects now risk spreading into the productive sphere (business failures, unemployment, etc.). On the construction side, the new housing sector continues to clear its books but the plunge in permits portends a fall in activity

programmed. In public works, on the other hand, despite a still fragile climate of confidence, activity and backlogs strengthened during the summer, with the long-awaited awakening of demand from communities finally seeming to begin! In short, the context appears very mixed and still very uncertain for the demand for materials...

Activity still slow this summer for materials

Materials activity was very sluggish this summer without however showing a clear deterioration. Thus, according to the latest results of the monthly survey, aggregate production has stagnated compared to June, leaving its level -4,7% below that of a year ago (CVS-CJO data). Over the last three months known, activity shows a decline of -3,6% compared to the previous three months (February-March-April) and -5,6% compared to the same period last year. Cumulatively over seven months, aggregate production lost -8,2% over one year and at the end of July, the annual level of activity would be -6,8% below that of the previous twelve months. On the BPE side, the volumes delivered have been rather stable month to month since May (+ 0,2% between June and July, CVS-CJO data), but in July they showed a level lower than that of -5,3%. of July 2022. Over the last quarter (May to July), BPE production fell further -2,8% compared to the previous three months to fall by -6,2% compared to the same period of 'one year ago. From January to July, the volumes of BPE delivered fell by -6% year-on-year, barely more than the slide in cumulative volumes over twelve months at the end of July (-5,7%). Materials activity is therefore at a low level but the rate of degradation tends to stabilize, the comparison with last year becoming less unfavorable than at the start of 2022 (where activity was more sustained).

The materials indicator, still provisional for the month of July, confirms this moderation in the rate of degradation. The contraction in activity thus went from -9,9% year-on-year in the first quarter (CJO data) to -7,3% in the second quarter. In July, the decline would be -6,1%. But this movement and its extent remain very contrasting depending on the materials.

Building: the worst is yet to come

Never immune to good news, the August survey conducted among construction professionals by INSEE showed a rebound in the business climate. Indeed, the opinion of contractors on their past and future activity has improved compared to July both in the finishing work and in the structural work, an observation also shared by the Bank of France survey. France. In this last segment of activity, the judgment on order books has even improved a little, the stock of work in months of activity having recovered slightly, going from 8,5 to 8,9 months. But “one point does not make the trend” and the level of work to be carried out has fallen significantly since its high point in August 2022 (at 10,1 months) even if it remains well above its long-term average level. term (6,4 months). Tensions on the productive system continue to ease and the share of business leaders who report obstacles limiting their production (63%) has now fallen below its long-term average. Supply difficulties (supply, labor, etc.), even if they remain at a high level compared to the past, are on the verge of normalizing, as is the evolution of forecast prices which continues to decline .

This trend echoes the drying up of demand which was confirmed this summer. As for developers, the INSEE quarterly survey in July reflects prospects for construction starts and a demand for housing which continues to deteriorate and the balance of opinion of companies wishing to study new programs n has never been so low since the survey existed (30 years)! On the marketing side, the picture is just as bleak: both sales and listings of new homes are still in sharp decline, of around -10% year-on-year in the second quarter of 2023, with the single-family home segment showing a decline. even more marked drop (-31,5% for supply and -16,3% for reservations). Builders of individual houses in the diffuse sector are facing the same difficulties and, at the end of July, the decline in sales reached -38,1% year-on-year according to Markemétron. Given the current context which is expected to last for a few more months (rising rates and restricted access to credit, still high property prices, failing public support, etc.), the CMIs do not rule out that 2023 will result in a plunge in property sales. at least 40%, unless the announced end of the current PTZ does not give rise to excess demand through windfall effect during the second half of the year... But for the moment, the level of permits continues to sink (- 26,3% from May to July over one year, including -31% for the collective) to reach 397.600 over twelve months while construction starts, with 333.100 units, lost again - 13,6% over the quarter. In a recent press release, the Building Federation warns of the alarming levels of sales to individuals and permits which, without rapid and targeted reaction from public authorities, will drive residential construction activity towards its historic lows of 1992-1993 ( to 275.000 homes within two years). It remains to be seen whether this cry of alarm from the profession will be heard by the executive which, in a recent intervention by E. Macron has just announced the upcoming presentation of a Housing Bill.

This is especially true since construction activity cannot be “saved” by the non-residential segment. Rather resilient so far, this sector is in turn showing signs of weakness: year-on-year over the seven months of 2023, surface areas started contracted by -19,2% and permits lost -1,5%, and this despite a rebound in public works (+8,4%). The revival of spending by local authorities (notably on health and educational buildings), also observed in the public works sector, could explain this movement.

TP: summer improvement

After a rebound in June, public works activity consolidated in July; cumulatively over the first seven months of the year, the volume of work carried out increased +4,6% over one year (CVS-CJO data). Over the same period, contracts concluded increased by +15,9% thanks, it is true, to the allocation of large project lots at the start of the year but also to the more recent increase in metropolitan spending on transport infrastructure. , as the FNTP points out in its latest economic report. If these first signals remain to be confirmed, they can nevertheless nourish the hope that the restart of the electoral cycle of public investments is finally underway. This trend could also be encouraged by the slowdown in cost inflation (TP01 at +3% year-on-year in the first half of 2023 compared to +9% the previous half-year) but also in quote prices, as the survey shows. the Bank of France.