Latest PMI® data pointed to a sharp contraction in French construction activity during October. The result was accompanied by an accelerated decline in new orders as the coronavirus disease 2019 (COVID-19) pandemic continued to suppress demand conditions. Meanwhile, the quicker decline in activity saw firms cut their staff numbers for the first time in four months.
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 – fell to 42.7 in October, down sharply from 47.3 in September. The latest reading signalled a marked contraction in French construction activity and one that was the fastest for five months. When explaining the decline, some panellists cited subdued demand conditions amid the prolonged COVID-19 outbreak.
At the sub-sector level, each of three covered market segments registered sharp declines in activity. The fastest contraction was recorded in housing, where work undertaken on projects fell for the eighth month in a row and at the quickest pace since May. Commercial activity also fell at the fastest rate for five months, while the decline in civil engineering work eased slightly from September.
As was the case in each of the previous eight months, new orders received by French construction firms decreased in October. Moreover, the rate of reduction accelerated to the quickest since May and was sharp overall. Anecdotal evidence suggested that the COVID-19 pandemic continued to curb demand.
Amid a steeper contraction in activity, there was a renewed decrease in employment across the French construction sector during October. The result followed three months of consecutive workforce expansion as firms began re-hiring after the lockdown period. The decline in the latest survey period was the quickest for five months and solid overall.
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Purchasing activity among building companies in France continued to fall at the start of the fourth quarter. Though marked overall, the rate of reduction eased from September and was softer than the average for 2020 so far.
Meanwhile, input delivery times continued to lengthen sharply during October. However, the rate at which vendor performance deteriorated eased to the softest since before the escalation of the COVID-19 outbreak in March.
On the cost front, input prices faced by French construction firms rose further in October. That said, the rate of inflation was the slowest for six months.
Looking forward, sentiment towards the 12-month outlook for activity deteriorated. In fact, the degree of negativity was the most severe since April, with builders anticipating further disruptions to their operations due to the COVID-19 pandemic.
Eliot Kerr, Economist at IHS Markit, which compiles the survey, said, “Amid the introduction of COVID-19 curfews across some parts of France, the construction sector saw an accelerated decline in activity during October. Moreover, the deterioration in demand conditions gathered momentum, and firms recorded a renewed decrease in employment.
“Although the latest results were worrying, the imposition of fresh lockdown restrictions will likely see activity decline to an even greater extent in the coming months. We can expect demand conditions to soften further as some businesses temporarily close. A number of prospective construction projects will likely be put on hold while the outlook remains uncertain, and that will almost certainly filter through to both the overall level of activity and to the jobs market.”
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