A slightly milder end to summer for the construction materials sector

However, all the factors that fomented this crisis (increase in construction costs, real estate prices and interest rates, decline in household purchasing power and tightening of credit conditions) are now in phase of moderation. Of course, tensions are far from having disappeared, but the gradual easing of certain constraints and a more “sustainable” housing policy could contribute, in the long term, to resolving the demand for housing, which is still strong and restrained. In this context, demand for materials is already suffering from the decline in construction sites, preparing for a slightly more severe correction when the current stock of notebooks is purged. The restart of work in the public works sector, which is rather encouraging for the future, is currently providing little support for demand for aggregates due to its weak “road” component.

A little positive break this summer

After stopping declining between June and July, aggregates and BPE activity increased in August. Indeed, according to the still provisional data from the monthly survey, the production of aggregates would have gained +3,7% compared to July (CVS-CJO data) nevertheless being -3,1% below its level of one year ago. Over the last three months (from June to August), activity continues to decline, but more modestly, by -1,5% compared to the previous three months and -4,1% compared to the same period. of 2022. In total, over the eight months of 2023, the volume of aggregates produced fell -7,4% year-on-year, a little more than the decline recorded cumulatively over twelve months (-6,6%). For their part, BPE deliveries gained +1% in August compared to July and are -2,5% below their 2022 level. So that, over the last three known months, production is almost stabilizes compared to the previous quarter (-0,4%) although it still displays a level -4,8% lower than that of the same period a year earlier. Cumulatively over eight months, BPE activity thus lost -5,6% over one year, almost the same decline as that observed over twelve months (-5,8%). The materials activity is therefore suffering from a construction situation which is deteriorating while still remaining fueled by backlogs of books, undoubtedly very unequal depending on the degree of urbanization of the territories. The materials indicator, for its part, would show a decline of -5,8% in August over one year (provisional data, CJO), which would bring the cumulative evolution since the start of the year to -8% (compared to -9% three months earlier).

The building remains dark but the TP regains color

While it is true that the synthetic indicator of the business climate in construction remains stable above its long-term average, the opinion of business leaders on their past and future activity and on their order books continues , for its part, to deteriorate over the months. This is in any case what the latest survey conducted by INSEE in September among building contractors shows, whose balances of opinion have now almost reached the long-term averages after peaking well above it for years. . Certainly, the level of backlogs remains high, at 9,1 months of construction sites in stock in structural work (compared to 6,4 months on long-term average). Such a level may be surprising; it could be explained by the fact that projects in progress or to be carried out are faced with a probable drop in productivity in a context where work completion times are extended (difficulties in supply, recruitment, etc.). Moreover, production bottlenecks linked to insufficient personnel are still at a very high level, well above long-term averages, as is the opinion of building contractors on their planned workforce. This observation confirms the maintenance of an activity that is still solid, but constrained, whose rate of progression is slowed down. On the other hand, new orders are contracting sharply, as suggested by the Banque de France survey carried out in structural works where the balance of opinion on the situation of backlogs has returned to negative and has deteriorated since January. These indicators echo the decline in construction starts which continues in the residential and non-residential sectors and the contraction in permits. Indeed, on the residential side, the number of housing starts fell sharply over the last three months (June to August) compared to the previous three months (-13,1% in CVS-CJO data). Compared to the same quarter of last year, this is 25% less (-16% in twelve months), which leaves the annual cumulative number of construction starts at 319.500 units at the end of August. The fall in permits seems to be stabilizing (-0,2% over the last quarter) but their current level is -27,8% below that of a year ago, during this quarter or cumulatively twelve months (i.e. 379.900 in total at the end of August).

In the premises segment, the surface areas started have fallen sharply over the recent period (-15,9% over one year at the end of August) out of phase with a more favorable trend in permits (-1%). Unlike housing, we can assume that, for business premises, the failure to start construction of authorizations is less akin to a cancellation of the project due to a loan refusal or financing difficulties but rather to a postponement pending a moderation in construction costs. It cannot therefore be ruled out that the current stock of non-residential permits could give rise to construction starts later, a hypothesis which could also, to a lesser extent, apply to certain residential projects... provided that the Conditions of access to credit become more flexible, costs fall and support systems are maintained. But these hypotheses, which cannot be ruled out (with banks being a little more accommodating after rebuilding their margins, real estate prices falling slightly and household solvency less affected) would produce little effect before 2025. In this respect, the recent declarations of the Minister of the Economy regarding new housing policy suggest the maintenance of the PTZ with revised and corrected eligibility conditions for the system. It is certainly better than a deletion but this new, tighter scope would not be enough, according to the FFB, to avoid the constructive slump in 2024.

As for public works, the situation brightened up a little during the summer, with the volume of work carried out now increasing by +4,8% year-on-year over the first eight months of the year (CVS-CJO ) according to the FNTP. At the same time, order books are filling up (+14,5%), thanks to a strengthening of public procurement, particularly in large cities.

Outlook 2023-2024

But, for the moment, demand for aggregates remains penalized by the decline in BPE production which is expected to contract by around -6% in 2023. The better orientation of the public works activity, little focused on road works, does not currently support the aggregates activity which is expected to contract by around -7% this year. Next year, with the continuation of the electoral cycle, community works could better support the aggregates activity even if the residential construction crisis would also weigh on private construction works but especially on BPE deliveries. In 2024, BPE production would therefore decline again, more sharply, while the decline in demand for aggregates would be a little more moderate than this year.

Key figures

Over the last three months known (June-August), the decline in activity over one year moderates slightly:

• -4,8% for BPE
• and -4,1% for aggregates

Illustrative image of the article via Depositphotos.com.