Advocacy ALERT

Economic data signals growth with Budget 2025 pointing to further construction investment ahead

Construction is outperforming the broader economy, and policy signals suggest that strength may persist. The winter edition of our Construction Quarterly Economic Insights shows the industry grew by 1.3 per cent in Q3 2025, while Budget 2025 outlines significant investments that point to sustained activity in the months ahead.

Key insights

• Canadian economy steadied: GDP rebounded in the third quarter of 2025, growing at an annualized rate of 2.6 per cent, surpassing $2.5 trillion. As the Bank of Canada moves to sidelines, interest rates are expected to remain at 2.25 per cent through much of 2026.
• Building permits lowered further in Q3: Following a downturn in the second quarter, building permits weakened by a further 5.1 per cent to $32.5 billion in Q3, representing a 9.9 per cent year-over year (YOY) decline. Ontario recorded the largest drop, with permit values down 15 per cent quarter-over-quarter. However, early Q4 permit activity suggests a rebound that could make up for the slack in Q2 and Q3, lifting the annual total into positive territory.
• Cost pressures remain elevated: Construction input costs continue to rise, led by steel-intensive divisions. The Building Construction Price Index (BCPI) increased 4.2 per cent YOY. Contractors should plan for ongoing price volatility, especially in factory construction and in higher-inflation regions like London and Quebec City.
• Federal Budget bolsters construction demand: Budget 2025 reinforces long-term construction demand, committing $280 billion over five years in capital investments. New measures introduce $150 billion in net spending before operational savings, with roughly one-fifth tied to construction-related activity. This package is built around three core federal priorities: attracting private investment, prioritizing Buy Canadian procurement, and supporting unionized labour.

What’s ahead for the industry?

Construction entered 2026 with steady momentum, supported by stronger-than-expected permit values late in 2025. Lower interest rates have helped support activity, but with rates now on hold, momentum from increased liquidity will fade in the coming months. While resale activity has improved, weak apartment pre-sales continue to slow new multi-residential projects.

Building construction costs remain elevated and represent a major ongoing risk. Buy Canadian policies and tariffs are creating uncertainty around where materials can be sourced and how much they will cost. As these requirements expand and Canada-United States-Mexico (CUSMA) trade talks approach in July, contractors should expect continued pressure on pricing, supply chains, and compliance requirements.

Although the federal budget has been tabled, important details may still change through the Budget Implementation Acts. Fiscal policy has turned strongly expansionary and construction-intensive heading into 2026. However, operational cuts and procurement restrictions could slow approvals, particularly for projects not prioritized by the Major Projects Office (MPO). Any changes that could affect project timing and eligibility will be closely monitored.

Labour demand is expected to rise as the national push to build materializes into a pipeline of new construction projects. At the same time, immigration policy is now targeting lower inflows and a smaller share of temporary residents over the next few years. This brings labour availability back into focus, making 2026 an important test of whether programs like the Union Training Innovation Program (UTIP) and the Foreign Credential Recognition Program (FRCP) can meaningfully address labour shortages.

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.