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Tue August 04 2020

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French construction rebounds

6 Mar 19 France’s construction sector rebounded in February with a return to growth, albeit at a modest rate.

Data signalled a return to growth, following the first decline in building activity for five months during January. Supporting the rise was an expansion in new orders, which also recovered after a contraction at the start of 2019. Firms have responded by increasing their purchasing activity and staff numbers, although the rate of job creation eased for the fourth month in a row. Meanwhile, input costs rose at the sharpest rate for just over seven-and-a-half years.

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 – recorded 51.3 in February, up from 49.5 in January. However, despite representing an improved performance, the latest figure indicated only a modest growth rate, and one that remained below the 2018 average (53.0).

“A return to activity growth in February is positive news for French construction firms, particularly given the sharp upwards pressure on input costs,” said Eliot Kerr, economist at IHS Markit, which compiles the survey. “The latest increase in cost burdens was the fastest since July 2011, with surveyed firms mentioning higher fuel prices as the main cause.

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"However, it is worrying to see that despite recoveries in output and new orders, employment growth has been unresponsive and continued on a downward trend. With the skilled labour shortages that are widespread across France, this problem may be beginning to bite in the construction sector. If firms are facing recruitment issues, this could dampen growth potential in the near future."

Underpinning the rebound in total activity was renewed growth in both residential and infrastructure construction. The former recorded the slightly quicker expansion, but in both cases the rate of increase was only moderate overall. Commercial activity was the only subsector to record a contraction.

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