S&P Global France Construction PMI: Activity Falls at Sharpest Rate Since May 2020

Key Findings:

• Total Activity Index slumps to 37.3, its lowest level in more than six years
• Sharper declines in new business and employment
• Year-ahead expectations turn more pessimistic

France’s construction sector downturn intensified during August, according to the latest PMI® survey data from S&P Global, as total activity shrank at the sharpest rate since May 2020. Weakness was the most pronounced in the residential and commercial construction sub-sectors, detailed data showed.

The headline S&P Global France Construction PMI Total Activity Index is a single measure that tracks changes in total industry activity. Readings below 50.0 indicate a decrease compared to the previous month and the further below 50.0, the faster is the rate of decline being signalled.

Falling from 41.5 in July to 37.3 in August, the headline measure signalled the sharpest contraction in total building activity across France since May 2020.

Each of the three categories monitored by the survey revealed falling activity levels when compared with the month prior. Commercial construction provided the sharpest drag on the sector as a whole, posting its second-quickest decline in over six years. Residential building work fell to the greatest extent since October last year, with the pace of decline accelerating substantially from that seen in July. Civil engineering activity was also down, albeit at a pace that was the softest since the beginning of the year.

Demand for construction projects in France decreased further midway through the third quarter. New orders have now fallen continuously since April 2022. Panel members cited fewer calls for tender. Overall, the pace of decline was the quickest in four months.

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French constructors remained firmly in retrenchment mode during August. Employment was reduced for a twentyeighth month in succession, with the pace of job shedding accelerating. Lower purchasing volumes were also recorded, although the extent to which buying activity fell was the softest in six months.

August’s reduction in construction material purchasing coincided with a slight increase in price pressures. The rate of input cost inflation remained well above its survey average and picked up for the first time since April.

Conditions across French constructors’ supply chains stayed challenging during the latest survey period, although there were signs that vendor capacity had become less stretched as average input lead times were the least delayed for six months.

When asked to assess the outlook for the next 12 months, French constructors struck a downbeat tone during August. Expectations for business activity were their most pessimistic since April, with around one-third of respondents predicting lower activity levels over the forthcoming year. This was more than three times the proportion that were anticipating growth (10%). 

Joe Hayes, Senior Principal Economist at S&P Global Market Intelligence, said, “France’s protracted construction sector downturn showed no signs of letting up in August. The fastest reduction in activity since May 2020, driven by accelerated declines in the residential and commercial sub-sectors, raises doubts that a turnaround is on the horizon. The data clearly point to a troubled outlook for domestic real estate investment activity, particularly with new orders falling steeply and firms’ expectations deteriorating further.”

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