Fueled first by strong tensions on supply and then amplified by the energy crisis, cost and price increases have spread to all sectors of activity (not sparing construction materials in the process) and bringing in their wake the return of a period of monetary policy tightening. The year 2023 should certainly mark an easing of these tensions (without however seeing them disappear) but will still bear, for sure, the scars of this past double shock. At the end of 2022, even if construction activity is still proving to be very resilient, certain demand indicators clearly reflect the effects of the solvency shock suffered by public and private agents (downturn in building permits and housing sales, sluggish investment by local authorities, etc.). In this troubled context, the production of aggregates and ready-mixed concrete is struggling to find momentum and the downward trend is stabilizing a little below -4% over one year at the end of November.
Activity picks up for aggregates, not for ready-mixed concrete
In the light of the first results of the November monthly survey, production of aggregates and ready-mixed concrete saw contrasting trends. Thus, the activity of aggregates would have increased by +2,9% compared to October, marking the second consecutive month of increase (CVS-CJO data). Production is certainly still -1,9% below November 2021 levels but, over the last three months, the trend has started to rise again compared to the previous three months (+2,1%). Signal of renewed activity on the TP order side or result of preventive storage behavior (in a context of rising energy prices and fear of load shedding)? It is difficult for the time being to decide, but if this strengthening is not confirmed in the coming months, it could result in a backlash at the start of 2023.
The trend over the three months of September-November nevertheless remains downward (-5,4%) compared to the same period last year. In total, over the eleven months of 2022, the activity of aggregates recorded a decline of -3,8% over one year. On the BPE side, after having increased in October, deliveries for the month of November fell compared to the previous month (-2,2%) and appear to be down sharply (-9%) compared to those of last year. (CVS-CJO). During the last quarter, ready-mixed concrete production fell -1% compared to the previous quarter and was -7,4% below that of the same three months of 2021. Cumulatively since January, ready-mixed concrete cubages have lost -3,7% over one year.
After a drop of -5,5% in October over one year (CJO data), our materials indicator, still provisional for November, describes a more moderate decline (-3,3%). In the third quarter, it was down -4,7% over one year and now shows a contraction of -3,1% over the first eleven months of the year.
Building: tensions moderate, permits "unscrew"
In December, according to the latest INSEE survey of the building industry, the business climate remained well above the long-term average, at a level not seen for 16 years. Structural contractors perceived an improvement in their past activity at the very end of the year and are also much more optimistic about their future activity. The judgment they pass on their order books has stopped deteriorating, the level of the latter remaining comfortable at 9,5 months of sites in stock. The morale of structural work contractors is therefore still showing resilience. Although they remain significant compared to the past, supply tensions are easing a little. It is still difficult to recruit, but the workforce continues to grow and the proportion of companies facing a shortage of personnel is slightly reduced. As for supply difficulties, they are moderating but 13% of companies cannot produce more for this reason (against 18% last October). On the price side, the easing is also confirmed, but very gradually: in December, fewer companies than the previous month announced an increase in their prices, but the corresponding balance of opinion still remains well above “normal”. Activity therefore remains solid in the building industry if the survey is to be believed.
* Variation in % compared to the same period of the previous year in data corrected for the number of working days - (p) Provisional - (1) Production data; other materials: deliveries - (2) The volume of the materials indicator corresponds to the sum of deliveries of the following products: cement, ready-mixed concrete, aggregates, concrete products, tiles and bricks. The variation in % of the “Materials Indicator” is equal to the sum of the variations of each product - (3) End of October.
On the construction side, data from the ministry show a firming up of housing starts (+1,8% over the three months from September to November, compared to the previous three months – CVS-CJO data), particularly in the collective segment. (+7,5%) while the individual gives ground (-5,2%). However, the number of housing units started remains -4,2% lower than in the same quarter of last year, reaching 377.600 units cumulatively over twelve months at the end of November (i.e. -3,1% year-on-year). With regard to permits, their number plunged by -34,9% in the last three months (compared to the previous three months). This time, it is the collective segment that is falling (-47,8%), the individual losing -6,7%. Despite this fall over the months of September to November (-24,8% over one year), the number of authorized dwellings remains on an upward trend cumulatively over twelve months (+5,6% to 491.200 units). The plunge in single-family homes can also be seen on the sales side with a -42,6% collapse over one year during the September-November quarter, according to data published by Markemétron. Demand had, it is true, been particularly dynamic in 2021, de facto supporting the decline observed. But the number of sales from January to November appears to be down sharply, whether in relation to 2021 (-31,3%) or compared to the long-term average (-23%); in total in 2022, barely 95.000 individual houses would be sold according to Markemétron, a level comparable to that of the crisis years.
The deterioration in the economic outlook, the resurgence of inflation, particularly energy inflation, the decline in household morale and more difficult access to credit have weighed (and will weigh further) on the real estate market in 2022 and 2023. Although all of borrowers currently benefit from housing loans at rates well below inflation (2,34% in December for a rise in consumer prices of +5,9%, i.e. largely negative real interest rates, which had not been observed since the end of the 50s), the production of loans contracted. The lengthening of the average duration of loans, to a record level of 20,7 years in December (compared to 13,6 years in 2001), does not succeed in offsetting the rise in house prices, the drop in purchasing power households and the stricter requirements of banks in terms of borrower contribution rates.
TP: slightly embellished
According to the latest survey carried out by the FNTP, the improvement in activity, which began in September, continued in November with a volume of activity up by +1,8% over one year. However, work carried out remains down -3,3% over the three months from September to November, compared to last year and, cumulatively since January, invoicing has contracted by -7,3% in constant euros over a year. This upturn, which is coupled with a slight easing in production costs and a certain strengthening of order intake, still appears fragile and too late to avoid a downturn in public works activity in 2022; but it nevertheless constitutes an encouraging signal... which remains to be confirmed.