Advocacy ALERT

CCA’s fall economic report finds construction steady, but increased costs threaten outlook

Canada’s construction sector continues to defy the broader economic slowdown, posting quarterly gains of 0.24 per cent despite rising costs and global trade uncertainty, according to the most recent issue of the Canadian Construction Association’s (CCA) Construction Quarterly Economic Insights report.

The latest edition indicates that activity remains steady; however rising costs, workforce shortages, and trade tensions may make it harder for companies to plan, bid, and deliver on the federal government’s nation-building agenda.  

The report also flags that upcoming “Buy Canadian” procurement rules, expected in November, could have mixed effects on project timelines and costs. CCA stresses the need for close consultation with the industry to ensure these policies strengthen, not limit, Canada’s capacity to build.

Key insights

• Construction steady as interest rates fall: Canada’s economy shrank by 1.6 per cent, but construction continued to grow modestly. Lower interest rates could support new investment in construction, particularly in multi-unit residential buildings.
• Fewer permits signal potential short-term slowdown: Building permits dropped 6.2 per cent in Q2, down 3.1 per cent year-over-year (YOY), hinting at a possible slowdown in project starts. Real estate market confidence has softened in Vancouver and Toronto, and a pre-sale market rebound may take time before housing starts pick up.
• High costs narrow Canada’s projects list: Construction costs rose four per cent over the past year, led by steel intensive divisions. Since 2017, industrial, commercial, and institutional (ICI) construction costs have risen twice as fast as consumer inflation. Higher delivery costs, new trade measures, and future federal procurement red tape could push costs up further.
• Trade shifts add new challenges: Tariffs and new “Buy Canadian” procurement rules expected in November may add to costs and delay projects. Industry consultation will be key to ensuring domestic sourcing supports, not hinders, Canada’s ability to build.

What’s ahead for the industry?

Canada’s construction industry is ready to build, but rising costs and new procurement rules could hold back progress. Developers are grappling with elevated delivery costs and softer multi-residential pre-sales, making projects harder to finance. While the Bank of Canada’s rate cut is a positive factor, monetary easing will not be enough to move the needle as Canadians remain hesitant to restart capital investment.

There is broad agreement that Canada needs to accelerate construction, but cost pressures and impending procurement restrictions risk slowing new projects before they can even get off the ground. CCA will continue to track tariffs, material prices, and procurement changes, and advocate for policies that support growth through construction.