Western Mainland Europe Construction Market Report 2Q 2023
France
Local economic indicators
The French National Institute of Statistics and Economic Studies (Insee) showed that the country closed 2022 with an overall gross domestic product (GDP) growth rate at 2.6%, significantly less than 2021 (6.8%) which was unusually high. Insee reported 1Q 2023 GDP at 0.2%, largely attributed to positive foreign trade as domestic demand was negative.
Overall, GDP growth in 2023 has been forecast at 0.7% by the Organisation for Economic Co-operation and Development (OECD) in its March report, A Fragile Recovery.
Insee indicated preliminary annual inflation at 5.1% in May 2023, an encouraging recovery from April (5.9%) and the largest single-month recovery in several years. Similar data is available in the Eurostat Harmonised Index of Consumer Prices (HICP) where there was a peak in February (7.3%) which has now fallen to 6.0% in May.
The International Monetary Fund (IMF) has estimated overall 2023 inflation to reach 5%, implying that France has met its target early.
Construction materials
Gleeds Intelligence last reported that there was some stability in the locally produced Building Trades (BT) Index which showed the overall All Trades (BT01) figure remaining around 14% between September 2022 and February 2023. This has now changed with the following three months (March, April and May 2023) producing steady increases, currently at 17% above that in December 2019.
Considering recoveries in global steel prices, it is no surprise that the specific framework and metal frames (BT07) figure has been decreasing since its peak last August, while the BT01 figure is increasing due to changes in production costs for key items seen below:
Market outlook
The construction confidence indicator recovered a positive figure in April (1.1) from March’s negative figure (-0.2), a first since March 2021. It dropped back down to –0.6 in May. Surveyed contractors are predicting positive work expectations (9.5) and decreasing material shortages, which are down 9.6 points in May since January.
General contractor management witnessed a clear deterioration in the building industry during the month of May 2023. Most market sectors reduced in size whether linked to activity, future order books, pricing levels or workforce. Future order books are estimated to assure 8.5 months of work (slightly reduced since previously analysed). Since March 2021, this work period based on order books has varied between 8.5 to 9 months.
As always, Gleeds advises regular project budget updates that take into account recent market pricing and local risk factors which may impact programmes and costs. Risk analysis studies are recommended to better evaluate and prepare appropriate contingencies for your particular project conditions and risk exposure.
Lutetia Hotel, St Germain des Prés, Paris — Gleeds provided Cost Management services.
