Canada’s construction industry softens as trade and cost risks persist
Canada’s construction industry entered 2026 on softer footing as the broader economy stalled and investment remained low.
The summer edition of our Construction Quarterly Economic Insights shows construction activities fell in the first quarter, while building intentions edged up slightly. Trade uncertainty and persistent cost pressures cloud the outlook.
Key insights
- Economy stalled in Q1, with a softer outlook ahead: Canada’s real GDP slipped at an annualized rate of 0.1 per cent in Q1 2026, as higher imports and weaker investment offset growth in other areas. Business capital spending fell for a fifth consecutive quarter, while weapons system spending pulled back after the late-2025 surge. Overall, growth is expected to remain softer through 2026.
- Construction activity continued to cool: Construction GDP contracted 1.3 per cent quarter-over-quarter (QOQ), driven by a 4.2 per cent drop in engineering and other construction activities. Building construction investment declined by 1.5 per cent, with weakness in the residential sector outweighing gains in commercial and institutional construction. Building permits were broadly flat, with improving single-residential and industrial intentions offset by weaker commercial and institutional permits.
- Inflation continues to rise in steel-heavy divisions: Overall construction price inflation eased in Q1 across most divisions, regions, and building types. However, structural steel framing and metal fabrication costs were still about 10 per cent higher than a year earlier. Inflation was lowest for high-rise apartments and highest for factories.
What’s ahead for the industry?
Trade uncertainty remains a central risk for the construction sector. As CUSMA negotiations and trade remedies continue to evolve, sector-specific tariffs, local procurement policies, and origin documentation requirements are becoming a more permanent feature of the operating environment. These pressures may limit supplier options, delay procurement, and increase project costs.
Energy-related cost pressures are another watchpoint. Oil and petrochemical price increases had not yet passed through to downstream construction products in Q1, but that could change if disruptions persist. The key question is whether hostilities ease and traffic in the Strait of Hormuz normalizes before higher costs become embedded in construction prices and broader inflation.
At the same time, defence spending is emerging as one of the clearer growth opportunities in Canada right now. While much of the increase will flow to equipment and weapons, it is also expected to create meaningful on-base and off-base construction demand, including dual-use infrastructure. Canadian Armed Forces (CAF)-linked apprenticeship pathways within the Team Canada Strong initiative could also help strengthen the skilled-trades pipeline.
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.