Canada’s construction industry faces higher costs amid global uncertainty
Canada’s construction industry is holding its footing amid a more fragile economic environment, but rising costs and geopolitical uncertainty continue to shape the outlook.
The spring edition of our Construction Quarterly Economic Insights shows the industry remains on course, though risks have left some footprints. Building permit values have rebounded, though they remain below last year’s levels. while cost pressures persist across steel‑heavy building segments.
Key insights
- Economy softened in Q4, but domestic demand held up: Canada’s real GDP declined at an annualized rate of 0.6 per cent in Q4 2025, driven almost entirely by inventory drawdowns. Manufacturing output eased as producers worked down inventories while continuing to meet resilient consumer demand. Final domestic demand increased 0.6 per cent, supported by a 0.5 per cent rise in consumption and a 0.8 per cent gain in gross fixed capital formation.
- Construction Q4 output pulls back: Construction GDP slipped 0.6 per cent quarter-over-quarter, while still posting a 1.8 per cent year-over-year gain. The quarterly pullback was driven mainly by engineering and other construction activities after strong growth in Q3.
- Building cost pressures concentrated in steel-heavy divisions: The Building Construction Price Index (BCPI) rose 4.1 per cent year-over-year in Q4, led by metal fabrications, structural steel framing, concrete, and plumbing. Building types with highest steel mix, like factories, are seeing the highest increase in construction costs, while cost inflation in high-rise apartments eased to 2.2 per cent.
What’s ahead for the industry?
The industry faces a complex mix of global and domestic risks. Elevated oil prices are already adding construction costs through higher expenses for transportation and the operation of machinery on and off site. If the disruption lingers, it will drive up the price of petrochemical materials such as asphalt, piping, insulation, and membranes. Energy-intensive products, such as aluminum, cement, and flat glass, are also feeling upward pressure. Despite these supply-side shocks, the Bank of Canada is expected to hold its policy rate through 2026.
Trade policy adds a second layer of uncertainty. The CUSMA review is being used to explore measures to “reduce dependence on imports from outside the region,” “strengthen rules of origin,” and “enhance the security of North American supply chains,” According to the U.S. Trade Representative (USTR). Trade and tariff risks are very much still alive and far from settled for builders.
Meanwhile, slower population growth is reshaping the labour outlook. Many forecasts suggest the Canadian labour force will see almost no growth over the next few years. While that does not necessarily imply a severe labour market downturn, it does hint that softer employment headlines may appear more often, especially as retirements begin to outpace new entrants.
For more information on this report or the work CCA is currently focused on to address the issues covered, please email Yunhan Liu, Analyst, Economics and Policy