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Renewed decline in construction activity during March in France

Christian Fernsby |
Following the modest recovery in February, French construction firms recorded a return to contraction in business activity at the end of the first quarter.

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Both residential and commercial activity contracted amid a moderate decrease in new orders.

Consequently, constructions increased their staff numbers at the softest rate since November 2017 and purchasing activity rose at a slower pace.

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 49.0 in March, down from 51.3 in February.

The result represented a renewed decline in French construction activity, and the quickest since last August.

At the sector level, the overall trend was driven by reductions in both housing and commercial building activity.

While the fall in home building was only moderate overall, the contraction in commercial construction was marked and the fastest for over two-and-a-half years.

In contrast, there was a second consecutive monthly rise in civil engineering work, although the rate of growth softened slightly from February.

A key factor behind March's decline in overall activity was a decrease in new business.

Though only moderate overall, the reduction was the second in the past three months and the fastest since August 2018.

Some panellists attributed the latest contraction to a softening in demand.

Despite renewed declines in output and new business, French constructors continued to increase their staff numbers at the end of the first quarter.

The result extended the current sequence of workforce expansion to 22 months.

However, the most recent increase in employment was the softest recorded since November 2017.

Input buying by French building companies also continued to rise in March.

The latest increase in purchasing activity was solid overall, with some panellists revealing plans to guard against higher raw material prices.

That said, the rate of expansion decelerated from February and was softer than the 2018 average.

On the price front, input costs continued to rise sharply.

Although the rate of inflation eased from its strongest for 91 months in February, it remained historically marked.

Anecdotal evidence suggested that the latest increase was driven by higher prices for oil-based products.

Vendor performance faced by French construction firms continued to deteriorate in March.

However, average lead times lengthened only moderately overall and to the least extent for nearly a year.

Finally, constructors remained confident of an increase in business activity over the coming year.

Moreover, the degree of optimism was stronger than recorded in February, supported by expectations for a rise in new orders.

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