What do current market conditions mean for our escalation forecasts?

US trade policy and geopolitical strife continue to dominate headlines, fueling economic uncertainty and, in turn, shaping construction cost escalation. Factors informing our escalation forecasts are:

• Current activity – interest rate reductions have supported growth and should continue to do so. Yet, an overreliance on housing as a key driver behind recent improvements is a risk.
• Leading indicators – political change and uncertainty are likely to pare back growth prospects. Forecasts are subdued with weak construction starts, particularly in housing.
• Materials cost and availability – increases are contained. Energy cost reductions have mitigated a good degree of tariff-based inflation, although this may well undulate. Freight costs have stepped up a gear.
• Workforce – recent workload increases have placed some upwards pressure on wages, alongside unionised agreements being enacted. Availability is balanced overall, however.
• Machinery and equipment – costs persistently rise at a steady rate of growth influenced by tariffs and vehicle costs. Operational costs have tempered as gas prices soften.

Even with recent activity improvements, construction demand has been muted for some time as constrained investment emerges amidst a weaker economic backdrop, both domestically and globally. At the same time, input cost increases have been benign, with materials not really seeing gains post tariff announcements and labour costs still sticky.

As a result, contractors have built up an appetite to improve pipelines and are hungrier to secure workloads and lock-in turnover, drawing down price pressures. Little has changed overall in terms of our bid price escalation forecast, with 2.0 percent still expected in 2025 – although growth is trending downwards. Even if tariffs cause an uplift to material costs, unless there’s a corresponding increase in demand, prices increases are unlikely to stick.

Escalation growth in 2026 and 2027 has similarly been left as it was in our Q1 2025 CAMI report, recording 3.0 and 3.5 percent, respectively. Economic uncertainty is likely to persist and confidence will be muted, yet bid prices may progressively build if more infrastructure investment is unlocked and brought forward.

Given the changeable economic landscape, bid prices are likely to fluctuate readily, and differences on a project-by-project basis could potentially become more widespread – above and below our national average. The residential market, particularly in Toronto and Vancouver, could even be exposed to negative price movements. As such, we’re proposing a broader range of escalation outcomes +/-3.0 percentage points around baseline predictions as uncertainty builds.

While the economy is in a holding pattern and sentiment continues to be subdued, provincial forecasts have remained unchanged - much like their national counterparts. Quebec and Alberta are higher than Ontario and British Columbia, with escalation figures set at 2.5, 2.5, 2.0 and 2.0 percent for 2025, respectively. These are visualized in Figure 9 below, with additional context available in our provincial commentaries.