Very gloomy start to spring for building materials

Rising construction costs, high land prices, changes in the institutional context (RE2020, ZAN law, etc.), scarcity of residential supply, rising interest rates, difficulties in accessing credit, etc.: these developments drive up property prices, weigh on household solvency even as their income is eaten away by inflation and, ultimately, stifle demand. And the adjustment of the new housing market by prices seems unlikely for the time being due to downward rigidity of costs. From January to April, ready-mixed concrete production contracted by 6% year-on-year, while that of aggregates lost nearly 10% (CVS-CJO). This decline is part of a context where building activity, although slowing down, is still fueled by the stocks of notebooks (which are running out) while, on the public works side, the work carried out is progressing sluggishly. In other words, the demand for materials is still expected to decrease in the coming months...

New decline in production between March and April

The first results of April's monthly survey suggest a further decline in materials activity. In aggregates, production fell -1,4% between March and April for a lower level of -3,8% compared to April 2022 (CVS-CJO data). Over the three months from February to April, activity fell further compared to the previous three months

(-3,1%), leaving the quarter down -9,2% compared to the same period a year ago. From January to April, production was down -9,9% year on year, with the base effect of the “good” first quarter of 2022 still weighing on the trend. Cumulatively over twelve rolling months, aggregates activity declined by -7% and thus lost nearly 3 points compared to its rate at the end of 2022.

For their part, ready-mixed concrete deliveries also fell between March and April, but more modestly (-0,7%), standing -2,6% below their April 2022 level (CVS-CJO). During the February-April quarter, activity only lost -0,9% but was down -5,6% compared to the same period a year ago. In total, cumulatively over the first four months of the year, ready-mixed concrete production contracted by -6% year-on-year. Rolling cumulatively over twelve months to the end of April, it lost -5%, or nearly one and a half points less than four months earlier.

Our materials indicator, still provisional for the month of April, also shows a decline (-5,4% over one year, CJO). After a first quarter contracting by -9,8%, the trend over the first four months of the year remains very negative (-8,8%), even if it is moderating a little, and none of the materials in the basket escapes the economic gloom.

Building: storm warning

Long resilient, the business climate in construction (measured by the INSEE survey) has deteriorated since February and more markedly in May, like the other balances of opinion relating to activity, order books or even at the prices and staff provided. Even if many of them are still above the long-term averages, they are inexorably approaching them before crossing the threshold, probably in the next few months. In May, building professionals perceive a deterioration in their past activity and their outlook is deteriorating, particularly in new housing and structural work. Even if, given the number of employees, the order books still cover 9,1 months of work in the shell, business leaders have an increasingly unfavorable judgment on their books, reviving their economic uncertainties.

The Banque de France survey, for its part, confirms that the situation for order books in structural work is getting more complicated, with the negative balance of opinion in May for the fourth consecutive month suggesting a scarcity of new orders. As for supply difficulties linked to supply problems in construction, they continue to ebb, without however disappearing; personnel constraints remain significant, which still reflects tensions in meeting demand. And even if the evolution of prices and estimates is in clear moderation, the market today bears the marks of the high points reached in 2022.

The latest data on the marketing of new homes for the first quarter of 2023 show a drop in sales to individuals of -41,1% over one year, to less than 19.500 units, and the time taken to sell stocks has slowed down. lengthened by 4 months in one year for apartments (to 4,7 quarters) and by 7,8 months for houses (6,2 quarters).

Given the moribund market and inventories which are mechanically recovering (+19,6% over one year in the first quarter with 123.805 housing units), developers continued to adjust their supply, reducing their listings by -14,9% in the first quarter year-on-year.

On the CMistes side, the situation is just as gloomy: according to Markemétron, sales of single-family homes in the diffuse sector plunged by -44,5% in April over one year, bringing the total for the first four months of the year to -34,4, 43,3% over the year, a level well below the long-term average (-XNUMX%).

Residential construction activity is not doing any better. Housing starts fell by -16% over one year during the three months of February-March-April with 354.200 housing units in total over twelve months (-8,9% over one year). In terms of premises, surface areas started also show a sharp decline, of -19,4% during the same period, with a total over twelve months down -9,6%. And the permit figures do not bode well for the future: from February to April, the contraction compared to last year reached -32,5% for housing and -9,8% for non-residential premises. .

All in all, the building construction sector is preparing to face a rather abrupt adjustment in its activity in the coming months, in the absence of a proactive support policy. At the beginning of June, the announcements of the public authorities following the CNR (National Council for Refoundation) on housing, did not meet the high expectations of professionals in the sector given the scale of the looming crisis. In particular, the absence of incentive measures for mayors (to issue permits) or even individual investors (end of the Pinel system) as well as the planing of certain existing measures (refocused PTZ and subject to conditions) will not allow hope for a real revival of the constructive dynamic...

TP: activity without momentum

According to the latest survey conducted by the Federation of Public Works, activity in April would have fallen compared to March but slightly increased over one year (+1,8% in volume, CVS-CJO data). Billings, which are very dependent on the evolution of costs and quote prices, testify to a lack of momentum in activity, whereas, halfway through the next municipal elections, they should rather pick up again. And apart from a few large isolated contracts, the trend in order intake (+4% over twelve rolling months) still does not reflect any real firming up of contracts concluded, particularly from public customers.

Key figures

At the end of April, cumulatively over twelve months, the production of ready-mixed concrete fell by -5% over one year, that of aggregates by -7% at the same time, sales of individual houses fell by -34% and building permits in housing by -30%...