Key Findings:

  • Construction activity rises for first time since January
  • New orders slip back into decline amid weakening demand
  • Input costs surge at unprecedented rate in April

For the first time since the start of the year, latest survey data signalled construction activity growth across France. That said, the expansion was only modest as underlying data showed sustained weakness across the residential and commercial building sub-sectors during April, while new orders slipped back into contraction.

Meanwhile, latest data signalled substantial cost pressures as increases in both input costs and rates charged by subcontractors were the fastest in the survey history.

The headline S&P Global France Construction Activity Index – which measures month-on-month changes in total industry activity – moved above the 50.0 no-change mark to 50.7 in April, from 48.4 in March, and indicating renewed growth of construction activity across France at the beginning of the second quarter.

That said, the expansion was only marginal and exclusively driven by an increase in civil engineering activity as construction work relating to residential and commercial projects both fell. Civil engineering activity rose at the fastest rate since July 2020.

Activity levels across the French construction sector were all constrained by weakness in demand, according to panel members, with latest data signalling a drop in new orders. Where a decline was reported, this was linked to higher rates charged. That said, the reduction was only fractional overall.

French construction firms raised their employment levels during April. Furthermore, the rate of jobs growth edged slightly higher to a three-month high and coincided with a positive and improved outlook towards the coming 12 months. The level of business confidence equally strengthened at the start of the second quarter to its highest since January, with firms expecting stronger new order intakes to support growth at their companies.

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However, on a less positive note, latest survey data pointed to a further steep lengthening in average input lead times during April. Panel members widely cited raw material shortages at vendors. However, the deterioration in supplier performance was the weakest in eight months.

Despite sustained supply-chain pressures, French construction firms raised their purchasing activity once again during April. Among the companies that raised buying levels, this was attributed to higher activity. The expansion was solid, albeit marginally weaker than that seen previously.

Elsewhere, latest survey data highlighted the intense cost pressures faced by French constructors during April. Input prices rose at an unprecedented rate as soaring energy prices were exacerbated by an increase in the price of oilrelated products, according to survey respondents.

French constructors were also faced with a survey-record increase in subcontractor rates during April. This came amid a deterioration in subcontractor availability, but a worsening in the perceived quality of the work. Overall, subcontractor usage declined for a third successive month.

Joe Hayes, Senior Economist at S&P Global, said, “It was a step in the right direction for France’s construction sector in April as total activity increased for the first time since January. There were also some additional positives to take, with employment growth and business confidence both also improving.

“That said, underlying data revealed some concern. There were further decreases in residential and commercial building activity over the month amid a broad deterioration in the demand for construction projects. Some businesses attributed a decline in their order books to rising rates charged as clients tighten their belts amid rapidly increasing prices across the breadth of the economy. With supply-chain issues still widespread, risks to the construction sector appear tilted firmly to the downside.”

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