Key Findings:

  • Construction activity grows at fastest rate since June 2020
  • Rebound in new orders couples with faster jobs growth
  • Input cost inflation slows amid less severe pressures on supply chains

The French construction sector showed further signs of improvement in January, with activity rising for a fourth successive month and to the greatest extent since June 2020. New orders returned to expansion territory and workforce numbers continued to increase. Panel members also expect these trends to carry on throughout the year, which supported a strong level of optimism towards future activity levels.

Meanwhile, supply issues persisted, although pressures were the least severe in five months. Input cost inflation also slowed over the month to the weakest since last March.

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 — posted 52.0 in January. This was an increase from 50.9 in December and therefore signalled a stronger expansion in French construction activity. Moreover, the upturn was the fastest since June 2020.

Data split by the three broad categories of construction work monitored by the survey – residential, commercial and civil engineering – showed that the expansion was broad-based, as was the case in the previous survey period. Of these categories, commercial building activity was the fastest-growing, while housing construction was the weakest.

Latest survey data signalled an improvement in demand conditions facing French constructors during January, marking a rebound from the marginal contraction seen at the end of last year. Overall, the upturn was solid and the quickest in eight months.

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– International Construction Exhibitions – UK Government Support for Exhibiting Overseas – Identifying Suitable Markets – Agent or Distributor – International Project Lead Sources

Amid growing order books, French construction firms hired additional staff at the beginning of 2022, extending the current sequence of jobs growth to five months. According to panellists, greater workforce numbers reflected company expansion. The increase in employment was faster than seen in the previous survey period, but remained weaker than November’s recent high.

Looking ahead, French construction firms anticipate activity levels to improve over the coming year. Stronger intakes of new work and greater client bases are expected to support business growth, according to survey respondents.

Meanwhile, latest data indicated sustained cost pressures faced by French construction firms. Anecdotal evidence suggested that shortages of materials remained a major hindrance to timelier delivery schedules. A lack of available staff and transport issues were also mentioned, however. These factors also led to another steep increase in operating expenses.

That said, the deterioration in vendor performance was the weakest in five months. Indeed, less severe delays in supplier delivery times coincided with a weaker rate of input cost inflation in January. Overall, input prices rose sharply, but to the slowest extent since last March. 

Commenting on the latest survey results, Joe Hayes, Senior Economist at IHS Markit, said, “Growth in the French construction sector gathered momentum in January as activity grew at its strongest rate since June 2020. Encouragingly to see was also underlying data, which showed construction activity being supported from multiple different areas – residential building, commercial building and civil engineering activity all grew at decent rates in January.

“Demand for new construction projects also rebounded, and anecdotal evidence showed that businesses are anticipating new workloads to keep increasing over the next 12 months and support growth.

“The risks remain centred around supply chains and inflation, however. Material shortages are persisting, as are issues with transport and vendors are also struggling with staff availability, no doubt a reflection of high COVID-19 cases at present. It was somewhat positive to see pressures recede slightly, which also coincided with the slowest rise in input costs for ten months.”

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