Construction market overview
Trade headwinds build to destabilize the construction industry
Despite sluggishness in 2024, the construction industry displayed signs of recovery as the year closed out. Q4 2024 saw sector GDP grow for the second quarter in a row – increasing by 1.1 percent. Some of that momentum was also maintained in January 2025, with nearly all sub-sectors contributing to growth as interest rate reductions and subdued inflation positively influenced activity metrics.
Source: Statistics Canada
Much like the wider economy, however, past precedent may not translate into future performance and the sustainability of recent construction growth could come into question. Following the onset of erratic US trade policy rhetoric since the start of the year, uncertainty has risen sharply.
With construction being investment led, muted sentiment and volatile performance indicators are likely to affect industry capital expenditure. Should confidence tumble as clients hesitate and wait for further tariff clarification to ascertain project viability, workloads could be reduced as projects are delayed, paused or cancelled.
Even before recent tariff announcements were considered, forecasts for industry activity were subdued at best. FMI Consulting stated that industry performance might be constrained by weak residential and private sector growth as uncertainty dents confidence and impairs decision making. Overall growth, however, is still set to increase by 3.1, 5.8 and 3.5 percent in 2025, 2026 and 2027, respectively. These figures are provided in current values, meaning that they exclude the impact of inflation. This implies that construction growth is likely to be softer overall.
Source: FMI
BuildForce forecasts for the industry are relatively weak as well. Growth in renovation work could offset declines in new housing, with more promise evident in 2026 and 2027. Engineering is set to experience low and slow growth in 2025 and 2026 as major projects end, while industrial, commercial and institutional activity offers a bright spot.
ConstructConnect expects new starts for construction to decrease by 2.9 percent in 2025 before improving by 6.1 and 2.0 percent in 2026 and 2027, respectively. While the direction of travel is similar, it is important to differentiate between these new start figures and the activity metrics of BuildForce and FMI. New starts are the total value of projects in each period, whereas the other activity metrics are the total value of construction spend over project duration in multiple periods. As such, activity forecasts tend to be less erratic while new starts can vary.
The main point here is that many experts anticipate a lower value of projects to commence in 2025, with constrained growth overall. Tariff impactions will hinder the industry further. Still, many hope, and expect, that the industry will grow although pipelines could be watered down. Federal and provincial government expenditure may well be needed to enhance construction workloads and support industry growth as private sector investment is curtailed amidst uncertainty.
