Key Findings:

  • Sector sees back-to-back increases in output for first time since early 2020
  • Employment rises at strongest pace for over three years
  • Input cost inflation continues to run at near record rate

Construction activity across France continued to increase in November, latest PMI data showed, with growth at its strongest since June 2020. Moreover, it marked the first time since early last year that building activity has risen in successive months.

Positive signals were also seen elsewhere, with both new orders and employment rising. Business confidence also strengthened despite input cost inflation running at a nearrecord rate.

The headline France Construction Purchasing Managers’ Index® (PMI®) — which is based on a single question asking respondents to report on the actual change in their total construction activity compared to one month ago — increased to 51.6 in November, from 50.3 in October, signalling back-toback months of growth in building activity across France for the first time since the start of the COVID-19 pandemic early last year.

Drilling down into different types of construction activity, the latest data revealed positive contributions from both residential and commercial building. The former posted its second rise in activity in the past three months, while the latter registered its strongest upturn since August 2019. However, civil engineering continued to weigh on the overall expansion, with activity here falling sharply and at the fastest rate in three months.

Latest survey data pointed to an increase in the volume of incoming new work placed with French construction firms during November. Moreover, the improvement in demand conditions was the strongest in six months, albeit only mild.

Looking ahead, French constructors were optimistic that activity levels would increase over the coming 12 months. Business confidence strengthened and was well above its historical average.

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Positive growth expectations supported firms’ efforts to bolster their capacities during November, with employment increasing for a third successive month. Furthermore, the rate of jobs growth was the fastest since October 2018.

Amid rising activity levels and improving demand for construction work, input purchasing increased in November. That said, surveyed companies continued to report substantial supply-side disruption, with average lead times on the delivery of inputs lengthening sharply. Anecdotal evidence suggested that the deterioration in vendor performance was due to stock shortages at suppliers.

Furthermore, supply-chain pressures was reported as a key reason behind rising input costs during November. Panellists linked the near-record rise in expenses to price hikes from vendors. Overall, the rate of inflation was just shy of the series high seen in July, with almost three-quarters of respondents (73%) recording increased cost burdens.

Commenting on the latest survey results, Joe Hayes, Senior Economist at IHS Markit, said, “The French construction sector showed further improvements during November, with momentum being gained. This will be a welcome sign for the wider economy given the slowdown we’ve seen in the manufacturing sector, in addition to the added risks that the new Omicron variant brings to services.

“Latest data showed the quickest expansion in construction activity since June 2020, as well as the strongest month of jobs growth in over three years. Robust business confidence also bodes well, and suggests firm are expecting new projects to materialise in the new year.

“However, the sector is unfortunately suffering from the same supply-related constraints we’ve seen in other parts of the economy, with shortages of materials causing delivery delays and inflating costs to a near record degree.”

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