A very bad month of November 2023 for the Building sector and a year 2024 which promises to be complicated

For almost two years now, the production volumes of construction materials have been gradually contracting in connection with the real estate crisis which is weighing on construction activity. With work in stock or in progress gradually coming to an end, the contraction in building permits recorded in recent months is now drying up housing starts, pushing BPE and aggregates activity to new lows.

The year 2024 therefore promises to be complicated for materials and other sectors linked to construction and real estate, the low point of the cycle having undoubtedly not yet been reached. Even if the factors which fomented the crisis (rising rates, restrictive granting of credits, real estate inflation, etc.) will clearly ease, the conditions for a restart are far from being met. Household investment in housing will remain weighed down by degraded solvency and a preference for savings in a context of rising unemployment and slowed economic growth.

Sharp decline in aggregates activity in November

The results of the monthly survey for November suggest a clear deterioration in materials activity, both compared to previous months and last year. It is also true that the rebound in aggregate production recorded at the end of 2023 with a view to storing (in a context of fear of electricity shortages) contributes to hardening the line but, in absolute terms, the observation is clear: in November , aggregate production would have fallen by -6,8% compared to October and -17,7% compared to November 2023 (CCS-CJO data), i.e. a level almost 17% lower than average monthly production of 2022. Over the last three months (September to November), activity fell -4,8% compared to June-July-August and -10,9% over one year. In total, over eleven cumulative months, the trend for aggregates declined by -8,4%. On the BPE side, the month of November was also marked by a deterioration, with delivered volumes contracting -3,8% over one month and -13,5% over one year (CVS-CJO data). This deterioration is even more marked over the last three months than for aggregates since deliveries are down -5,5% compared to the previous three months (and -10,4% year-on-year). Here too, the volumes delivered in November recorded a very low level compared to the monthly average for 2022, of around -15%. Cumulatively over the eleven months of 2023, the volume produced is down almost -7% over one year.

And the other materials are not doing any better! Our indicator in fact describes a clear decline in activity in November with a fall of -18,7% compared to last year (CJO data). Tiles and bricks plunge by around -38% while concrete products intended for buildings contract by almost -27% compared to November 2022. In one month, the cumulative trend of the materials indicator loses one point , going from -8,6% at the end of October to -9,6% at the end of November.

When the building is not going...

Although the business climate, measured by INSEE in the construction industry, remained just above its long-term average in December, the signals of continued economic deterioration are confirmed, particularly in the structural work segment. In this sector, in fact, the balance of opinion on past activity fell significantly in December while that on expected activity has fallen more sharply since October. Order books are gradually emptying (to 8,7 months compared to 10 a year ago) and the judgment on the books has now fallen well below its long-term average. The decline in construction activity should continue to affect the business climate of structural work professionals for a good part of 2024. At the end of November, over the last three months, housing starts still fell by -23,4, 19,6% over one year (-294.700% over twelve months to 4 units!). Even if, on the permit side, the decline tends to moderate, which still deserves to be underlined, (-25,5% over the last three months compared to -8,5% over twelve months), the negative trend rules out the hypothesis of an improvement in activity. This is especially true since, in the non-residential sector, the trend in permits has remained downward over the last three months (-0,6% over one year) despite construction starts which tend to stabilize (-2023. 9%). According to the FFB (French Building Federation), the year 1.000 should result in barely more than 14 housing starts per 35 households compared to an average of 8 over the last 1.000 years, even as the population increases. ... a situation which is expected to get even worse this year with a ratio of XNUMX per XNUMX.

The fall in sales of new housing, fueled by the combination of economic, financial and political factors (increase in interest rates, real estate prices, bank requirements, decline in household solvency, elimination of the PTZ, sobriety property -ZAN...) continues at the end of the year, as evidenced by the latest figures from Markemétron in the diffuse individual segment. At the end of November, sales were still down by almost -45% over one year, leaving the cumulative figure over eleven months at -38% (i.e. 61.000 sales over one year). Neither the windfall effect of the end of the PTZ “version 2023” (with eligibility of zones B2 and C and the individual house) nor the moderation of the prices of new housing, nor the improvement in the bank credit offer failed to revive the market, now weighed down by faltering household demand. The housing crisis obviously affects the building industry but it also instills its effects in the rest of the economy, spreading upstream and downstream declines in activity and already an increase in business failure rates, particularly among agencies and real estate agents. The fear of unemployment and the preference for savings will now also weigh on the demand for housing among households, who have become more cautious and wait-and-see despite better-oriented banking and financial conditions. In such a context, the action of public authorities, through their capacity to “rearm” the real estate cycle by making the market more fluid and resolving demand, appears decisive for the future of the entire building sector and economic growth.

TP: collateral damage of the housing crisis

The situation of public works is rather an exception in this rather gloomy picture: according to the FNTP, activity actually shows an increase of +4,5% in volume and year-on-year over the first eleven months of the year. (CVS-CJO data). Despite a month of November marked by bad weather, the work carried out stabilized compared to October (+0,5% in volume); as for order intake, they jumped in November (+142,7% in volume over one year) to reach a historically high level, due to the awarding of large contracts for the EPR nuclear reactors, after those for the Toulouse metro in beginning of the year then from line 15 of the GPE. Cumulatively over eleven months, the contracts concluded therefore increase by +27,2% over one year.

These major projects should support public works activity throughout the year, but the construction crisis, and its negative impact on private sector customers, will slow down the dynamic. Furthermore, the weak “road” component of the works (linked to investments by departments expected to decline) should continue to weigh on demand for aggregates.