44% of craft enterprises expect a decline in profitability

93% of the country’s craft businesses expect sales to stagnate or decline in 2024. 44% expect profitability to decline this year. In other words, the situation in the craft sector remains unstable in a global context marked by economic uncertainty and geopolitical upheavals. “The latest business survey shows that the craft industry remains under significant pressure in the first quarter, influenced by unfavorable market conditions,” concludes the Chamber of Crafts (Chambre des métiers) in the introduction to its published May 24, 2024

“For two-thirds of craft enterprises, nominal sales growth did not exceed inflation, which led to stagnation or an actual decline in real income,” the chamber emphasizes. It also notes that 68% of companies are therefore forced to draw on their financial reserves, further increasing economic pressure.

(Almost) all sectors are slowing down

Among craft enterprises, construction companies continue to be hit very hard by the economic situation, both due to a significant reduction in the number of building permits and a sharp decline in the number of sale before completion (vente en état futur d’achèvement, VEFA), indicating a marked slowdown in activity in the short and medium term. “The analysis of the construction sector indicates a continuation of the downward trend, and the activity index in the first quarter of 2024 will drop to -25 points,” we read in the report.

This trend has employment implications. Data from the General Inspectorate of Social Insurance (IGSS) show that in the second half of 2023, the construction industry lost 2,108 employees, with a significant drop in the number of overtime hours and the number of temporary workers. In addition, approximately one third of construction companies plan to reduce employment in 2024, for example by giving up departures.

As for the government’s recently announced measures to revitalize the real estate market, “more than half of construction entrepreneurs consider them insufficient,” notes the Chamber of Crafts, which claims that these measures “do not currently enable new construction projects to be launched.”

As in the construction industry, the activity rate in the construction and civil engineering sector also dropped dramatically, to -42 points in the first quarter, but a slight improvement can be expected in the second half of the year. The automotive sector is equally weakened and its situation seems to be getting even worse. The activity rate in the first quarter of 2024 was -3 points. “The climate of uncertainty among both professional and private clients largely explains this stagnation. As for forecasts, they indicate a continuation of the downward trend, with an index of -4 points for the second quarter of 2024, which illustrates a further decline in business confidence and potential demand,” we read in the document. Other sectors such as fashion, health and hygiene (FHH) are also in a delicate situation: “Following further recovery, the FHH sector recorded a significant slowdown in the first quarter of 2024, with an activity index of -0.3 points and business leaders industry predict an even more unfavorable trend, forecasting the indicator for the second quarter of 2024 at the level of -5 points,” warns the report.

Prolonged recession

Unlike the others, the communication sector is doing slightly better. “It is currently demonstrating the ability to maintain relatively stable economic activity despite a very slight decline in activity compared to Q4 2023.” However, the forecasts for the next six months are less encouraging: a decline in activity is expected, which can be explained by a reduction in companies’ marketing budgets. “Nonetheless, despite these challenges, some resilience in the sector appears to remain, illustrating a notable ability to adapt to economic and regulatory changes that may impact communications and marketing strategies in the future.”

The forecasts detailed by the Chambre des métiers are consistent with this unfavorable economic climate. However, the activity rate is not expected to decline further for the rest of the year and should remain at current levels in the second half. “An expected, but not guaranteed, general decline in interest rates between now and the end of 2024 could provide some relief, although no more significant easing in banking conditions is expected before 2025,” the chamber adds.

More broadly, the detailed data reflects “a prolonged recession with no immediate signs of recovery.”

This article was first published in French on . It was translated and edited for Delano.