While the sector initially showed resilience, returning to pre-crisis activity levels from 2021, it is now facing the backlash of soaring production costs and the deleterious effects of inflation. on the constructive request. Down -4% in 2022, the production of aggregates and ready-mixed concrete is still struggling at the start of 2023. Rather well filled in structural work, order books are gradually emptying without being replenished while they are still lacking on the public works side. Admittedly, the business climate remains at a high level in construction, but its erosion has well and truly begun and should continue, in connection with the contraction of the new real estate market, while in public works activity is slowing down .
Aggregates activity very slow in January
According to the first estimates available for January, activity in materials should remain at levels well below those of last year. Thus, despite a recovery of +2,7% compared to December (CVS-CJO data), ready-mixed concrete production shows volumes down -7,3% compared to January 2022. It is true that the start of last year was marked by fairly sustained activity, which accentuates the trend. However, over the last three months (November to January), the deterioration remains more contained, deliveries having lost only -0,7% compared to the previous three months but their level is -6,6% below from that of the same period a year earlier. Cumulatively over the past twelve rolling months, the BPE trend was down -4,2% at the end of January.
As regards aggregates, activity fell again at the start of the year, yielding -2,7% between December and January (CVS-CJO data) and leaving the volumes produced in contraction of -11,3% on a year. Here too, the base effect is unfavorable due to a good start to 2022. Over the last three known months (November to January) and thanks to a rather dynamic month of November, aggregates activity remains in increase of +1,1% compared to the previous quarter but is however down compared to the same period a year ago (-5,8%). At the end of January and on a rolling cumulative basis over the last twelve months, aggregates production is now down by -5,1%.
After observing a decline of -3,6% over one year in the fourth quarter and -3,1% in 2022, the materials indicator, still provisional for the month of January, should record a contraction of -10,1% in January (CJO data), concrete products having also experienced an aggravation of the decline in their activity at the start of the year.
Construction: erosion of the business climate and order books
According to the monthly survey conducted by INSEE in the construction industry, the deterioration in the business climate, which began in January, continued in March. However, its level is still well above its long-term average, which reflects a high level of activity in the sector. But many signals confirm that the high point has passed and that the erosion of confidence indicators will continue.
If the level of order books is still higher than 9 months in structural work (9,3 months, i.e. 3 months more than on average over the long term), the opinion that entrepreneurs have of their order books is further deteriorating, a sign that this high stock of work to be carried out reflects more of a bottleneck or “queue” effect than a flow of new orders to be carried out. In fact, tensions over supplies or recruitment difficulties remain significant and further slow down the execution of projects, but the survey shows that they are moderating from month to month. The ebb of these tensions, which is accompanied moreover by a sharp decline in the opinion of building manufacturers on forecast prices (the balance of which nevertheless remains well above its long-term average) should lead to empty the notebooks without them filling up elsewhere. Indeed, the latest indicators of the new housing market show a drop in demand for housing.
As for builders of single-family homes, sales for the last twelve months fell by -31,2% at the end of January according to Markemetron (to 94.100 units, the worst score in the last fifteen years with a level lower by -23% than its long-term average). Among developers, with just over 102.000 reservations for apartments and houses in 2022, the dropout reached -14,6% over the year, the trend worsening in the second half. And social housing is not doing any better with a -15% contraction in block sales over 2022 (9.107 units in total). These trends will confirm the downward movement in housing permits that began a few months ago: the latter certainly increased by +3,2% over the year 2022 (to reach the “comfortable” level of 483.400 units) but plunged by - 25,4% in the fourth quarter and -18,1% in January 2023 over one year.
As for housing starts, they show a drop of -5,2% in 2022 (to 371.000 units), i.e. a rate comparable to that observed in January 2023 (-5,4% over one year). The non-residential segment is doing better with authorized areas which, after an increase of +10,7% in 2022, continued to progress in January (+11% over one year); the surfaces of premises started, meanwhile, have recently fallen (-19,6% over one year in January after -9% in the fourth quarter) while they end the year 2022 on an increase of +8,7% . It is true that the economic environment for new construction is particularly poor: driven by the revaluation of the usury rate, home loan rates continue to rise rapidly to reach 2,82% on average in February, a multiplication by 2,7 in just over a year! At the same time, real estate inflation in new construction continues (+2,8% in one year and +15,6% since 2020 for a house) under the effect of the rise in the price of materials and the entry into force of the RE2020 which, according to the FFB Pôle Habitat, increases construction costs by +7,4% on average. In a context of deteriorating solvency, households are facing an explosion of mortgage loan refusals, the flow of which has plunged by -46,5% over one year over the past three months (November to January).
TP: a lackluster start to the year
Despite a slight increase in activity in January compared to December (+3% in CVS-CJO data at constant prices), the volume of public works carried out remains down compared to last year (-4,8 %); cumulatively over the past twelve rolling months, activity still posted a contraction of -7,2% at the end of January, according to the results of the survey conducted by the FNTP. Order books have certainly experienced a strong rebound at the start of the year (+35,2% over one year) but this is exclusively attributable to the awarding of a lot for a large-scale project (3rd line metro station in Toulouse) and does not reflect a movement to strengthen investment by public and private players in the territories, the only underlying trend that could revitalize activity in the sector.
In January, activity firmed up compared to December for ready-mixed concrete (+2,7%) but fell for aggregates (-2.7%).