Input costs pick-up after recent stability

Construction input costs grew steadily in 2025, increasing by 2.8% on the year. A year of subdued demand kept a lid on industry cost pressures, despite the inflammatory backdrop of trade disputes, unionized wage awards and rising geopolitical tensions. Labour, material and machinery and equipment contributions to headline rates were not felt equally, however.

Labour costs were the main driver behind the annual gain, growing by 4.7% on the year, underpinned by union-driven rigidity. Yet this annual strength was undercut by a 1.7% contraction in Q4 2025. This late-year wage drop aligned with a broader cooling of labour demand, with the construction vacancy rate softening to 3.1%.

While recent wage reductions provide light relief for industry cost pressures, they are unlikely to be the start of a new trend. Canada’s construction workforce has an age demographic imbalance, driven by a large share of older workers and an insufficient pipeline of new entrants. In 2025, 18.9% of its labour force were in the 55+ age group – up from 11.6% 30 years ago. Wage rates still need to be competitive to ensure workers are secured against a depleting reserve of skilled labour.

Machinery and equipment costs increased by 1.8% in 2025, with volatility varying by asset type. Medium and heavy‑duty truck costs rose by 9.2%, while pumps and compressor costs climbed 3.7%. Conversely, electric motors and generator prices stayed relatively flat in 2025 (+0.3%) as workloads cooled.

Although modest activity growth in 2026 should keep machinery and equipment costs stable, they are likely to rise due to disruptions of oil flows and energy supply chains. With gas and diesel costs ratcheting up, additional operational costs for machinery and equipment are likely to present themselves.

Material costs rose 1.7% in 2025, although this benign increase obscures a meaningful uptick in recent months. After subdued movement through the first half of the year, material costs surged by 2.7% on the quarter and 4.6% on the year in Q4 2025, the strongest increases seen since 2022.

Price movements varied significantly across commodities. Copper materials saw some of the largest gains, with copper pipe and tube up 12.4% and copper cable up 7.1% in 2025. These increases reflect strong demand from mechanical and electrical trades, constrained global supply and US import tariffs. Concrete products also climbed sharply, with concrete paving (+8.5%), concrete masonry units (+5.5%) and ready‑mixed concrete (+5.4%) rising on the back of higher raw material costs and robust infrastructure demand.

By contrast, steel prices weakened. Structural steel prices were essentially flat (+0.1%), while steel pipe and tube fell 12.7% over 2025. Softer residential and industrial construction activity reduced consumption and decreased export volumes to the U.S. due to tariffs increased domestic availability, placing downward pressure on prices.

Source: Statistics Canada

The conflict in the Middle East adds another layer of uncertainty to material costs in 2026. Iran’s strategic location in global commodity flows, particularly for oil, liquefied natural gas (LNG) and aluminum, creates potential vulnerabilities for construction inputs.

For Canada, the immediate impact is higher shipping and increased energy‑intensive material costs, along with the possibility of delayed or constrained material availability if disruptions persist. While existing inventories may cushion short‑term pressures, a prolonged conflict could erode buffers and lead to more pronounced cost escalation as 2026 progresses.