HCOB France Construction PMI: Activity, New Orders and Year-Ahead Expectations Fall Sharply in September

Key Findings:

• Total Activity Index resumes its recent downward trend
• Year-ahead expectations at their weakest in ten months
• Firms retrench further as employment and material purchasing decline

France’s construction sector downturn extended into the final month of the third quarter, with the rate of decline in activity accelerating once again. A dearth of new projects reportedly weighed on building work, with underlying data signalling a quicker reduction in new order inflows. Retrenchment continued as both employment and material purchasing contracted, while firms’ year-ahead expectations sank to their lowest in ten months.

The headline HCOB France Construction PMI® Total Activity Index — a single measure that tracks changes in total industry activity compared with the previous month — posted 42.9 in September. This was down from 46.7 in August, signalling a sharp and accelerated contraction. The latest fall in total industry activity meant the construction sector downturn was stretched to 40 months.

All three types of construction activity monitored by the survey displayed worsened trends during the latest survey period. As was the case in August, housing was the key source of weakness, with residential building work decreasing at a steep and accelerated pace that was the most pronounced in three months. A considerably quicker fall in commercial construction was also registered, while civil engineering activity moved back into contraction after August’s brief uptick.

Volumes of new work received by French construction firms continued to decline during the latest survey period. A reluctance from clients to commission new projects was reported, with some panellists citing current business conditions as a factor. The reduction in new orders was sharp and faster than that posted previously.

The persistence of twin contractions in activity and new business prompted French constructors to remain in retrenchment mode during September. Quantities of construction materials purchased fell considerably, stretching the current sequence of decline to just shy of two-and-a-half years. Workforce cutbacks were also recorded, although the rate of job shedding was the softest seen since May.

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

Cost pressures were relatively contained at the end of the third quarter. Although operating expenses rose, the rate of inflation eased to a five-month low and was well below the survey average.

Looking ahead, September saw a marked fall in business confidence, with the HCOB Future Activity Index slipping to a ten-month low. Expectations of lower calls for tender, a lack of new opportunities and political uncertainty dampened sentiment, anecdotal evidence showed. The proportion of companies predicting a fall in construction activity (35%) was greater than those anticipating growth (13%) by nearly three-fold.

Commenting on the PMI data, Nils Müller, Junior Economist at Hamburg Commercial Bank, said, “France’s construction sector remained firmly in contraction territory in September. The headline PMI dropped to 42.9 from 46.7 in August, extending the downturn to a 40-month sequence. This underscores the persistent weakness across the industry.

“Residential building continued to lead the decline, with activity falling at the fastest pace since June. Commercial construction also deteriorated markedly, while civil engineering slipped back into contraction after a brief reprieve in August.

“The lack of new projects remains a key drag, as new order inflows fell at a quicker rate, reflecting subdued client appetite amid unfavourable business conditions. In response to the ongoing slump, firms scaled back operations further. Purchasing activity contracted for the twenty-ninth consecutive month, and employment levels declined again, although the pace of job shedding eased slightly. Cost pressures were relatively muted, as input price inflation cooled to a five-month low.

“Business sentiment weakened notably, with the Future Activity Index dropping to its lowest level in ten months. Political uncertainty, fewer calls for tender, and a lack of new opportunities weighed heavily on expectations. With 35% of firms anticipating a further decline in activity and only 13% expecting growth, the outlook for France’s construction sector remains bleak heading into the final quarter of the year.”

For further details, click here.

Keep up to date with construction sales and marketing news.
Register for our free monthly newsletter:

Subscribe on LinkedIn