France’s construction sector hits new low in July – PMI

France’s construction sector plunged deeper into contraction in July, with the headline HCOB France Construction PMI Total Activity Index falling to 39.7 from 41.0 in June, marking the sharpest decline since January.

The sector faced accelerated drops in residential and commercial building work, with activity levels decreasing at the fastest rate in over four years. New orders also fell sharply, leading to increased reductions in purchasing and employment.

The decline in demand prompted firms to cut back on purchasing and staffing, with job losses and reduced subcontractor usage recorded.

Despite these cutbacks, input costs continued to rise, though at a subdued rate. Firms’ outlook for the next year has become increasingly pessimistic, with the Future Activity Index reaching a year-to-date low as nearly a third of businesses anticipate further reductions in work.

“That doesn’t look good at all. In July, the HCOB France Construction Total Activity Index dropped further to 39.7, the lowest level since the beginning of this year. Overall, demand weakened even further as the new orders index turned down yet again, which is reportedly due to some difficulty for clients securing loans, according to anecdotal evidence.” said Norman Liebke, Economist at Hamburg Commercial Bank.

“Although we expect another interest rate cut by the ECB in September, this will hardly revive the French construction sector. Thus, we anticipate that the sector will remain in recession for this year.” Liebke added.

Attribution: HCOB France Construction PMI®