Key Findings:

  • Construction activity growth accelerates to four-month high
  • New orders fall at strongest pace since last August
  • Input price inflation holds close to April’s survey peak

The French construction sector registered back-to-back increases in activity levels during May, with the rate of expansion accelerating to a four-month high. Furthermore, business confidence improved, while firms added to their payroll numbers in a bid to sustain the current activity growth trend. However, there was a further deterioration in demand for construction projects amid reports of client hesitancy.

Furthermore, supply issues intensified, with input lead times lengthening to the greatest extent since November last year. Consequently, cost pressures remained substantial as input costs rose at the second-sharpest rate on record.

The headline S&P Global France Construction Activity Index – which measures month-on-month changes in total industry activity – posted 50.9 during May. This was a marginal increase from 50.7 in April, but marked a second successive expansion in French construction activity as the headline figure once again posted above the 50.0 mark that separates growth from contraction. Additionally, although the increase in building activity was only mild, it was the fastest in four months.

According to data split by the three monitored types of construction work, the expansion in overall activity was exclusively driven by civil engineering as commercial and residential building work declined midway through the second quarter.

Although overall activity levels increased in May, latest survey data highlighted a further deterioration in demand for construction projects across France. The decline in new orders was the strongest in nine months amid rising prices and reports of client hesitancy.

Nevertheless, there were positive signals within the forwardlooking survey indicators during May, with businesses increasing their purchasing volumes during the latest survey period. The expansion was solid overall, albeit the weakest for three months.

The Exporting from the UK section of the Construct UK Directory includes
– International Construction Exhibitions – UK Government Support for Exhibiting Overseas – Identifying Suitable Markets – Agent or Distributor – International Project Lead Sources

French construction firms also expanded their workforce numbers in May. According to some respondents, staffing levels were raised to complete outstanding projects in a timely manner. Overall, the rate of job creation was modest and broadly unchanged from April’s three-month high.

Employment and purchasing activity growth coincided with a stronger 12-month outlook in May as the level of business confidence reached its highest in four months. French construction firms remained optimistic towards the forthcoming year amid hopes of supportive demand conditions.

That said, latest survey data highlighted substantial supply constraints during May. Average input lead times lengthened considerably amid frequent mentions of supply shortages. In fact, the extent to which vendor performance deteriorated was the strongest since last November.

Consequently, French building companies observed severe cost pressures in May. In addition to rising construction material prices, surveyed businesses commented on increased energy costs. Overall, the rate of input price inflation was the second-sharpest on record. 

Joe Hayes, Senior Economist at S&P Global Market Intelligence, said, “French constructors squeezed out another marginal increase in activity during May, despite considerable headwinds to the sector. According to anecdotal evidence, projects which were not completed during the pandemic were a factor supporting activity levels as survey data signalled continued weakness in demand for new work.

“Client hesitancy was often mentioned as a reason for falling new orders, although other panellists cited the impact from rising prices. Challenging supply conditions also persisted in May, with input lead times lengthening to the greatest extent since last November.

“That said, forward-looking indicators from the survey imply that the immediate outlook may prove to be somewhat resilient. Higher employment and purchasing activity, as well as stronger confidence suggest that growth may be sustained for a bit longer.”

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