Rising energy and materials prices have caused production costs in the construction industry to soar over the past two years. According to the latest data from Insee, a slight decline, which began several months ago, continued at the end of 2022, but construction prices should remain high in 2023.
Building: a steady rise of between 6% and 7% in the final quarter of 2022
According to Insee's building and civil engineering indexes for the 4th quarter of 2022, the rise in production costs in the construction industry, which has been on the decline since last summer, continued to slow at the end of last year.
The index for all building trades (BT01) stood at 127.9 in August 2022 (compared with a base of 100 in 2010), and fell to 126.8 in December. In the public works sector, the general all-works index (TP01) fell to 126.5 in December, after having reached its highest level in June-July 2022, at 129.1.
Despite a relative stabilization of prices, the sharp rise of the last 2 years has not been erased, and was still around 6 to 7% in the last quarter of 2022 for the building sector. The decline can be explained by a slight drop in prices for petroleum products and steel.
While the fall in the price of petroleum products has benefited the public works sector, rising energy and materials prices, as well as labor costs, are still weighing on the building industry.
Production costs to remain high in 2023
Not all construction activities are benefiting equally from the stabilization of production costs. Some, such as tiles and ceramic cladding, are victims of even higher inflation, with their index up 11 points year-on-year to 125.2 in December. The index for PVC joinery rose by 12.1 points to a record 126.6, while that for glazing and mirrorwork jumped by 21.3 points to 148.8 in December.
According to the specialists at Insee, the trend of stabilizing prices at a high level is set to continue into 2023. Electricity and materials prices have risen so sharply over the past two years that no significant decline is expected in the months ahead.
The French Building Federation (FFB) estimates that wage increases will weigh more heavily on the sector this year than last, attenuating the effect of stabilizing material prices.
The situation will have an impact on the construction cost index (ICC), which had already risen by 6.92% year-on-year in the first quarter of 2022, and by 8% over the following two quarters. Figures for the fourth quarter will be available at the end of March.