Pressure set to build amid rising energy costs

In Q1 2026, construction input costs rose by 0.6% and 2.1% on the quarter and year, respectively. While cost growth remains moderate for now, persistent geopolitical tensions, trade-related uncertainty and ongoing supply chain friction continue to create a volatile pricing backdrop, particularly for energy-linked inputs.

Labour costs rebounded in Q1 2026, with construction average weekly earnings increasing by 1.9% following a contraction in the previous quarter. This also coincided with a rise in the construction job vacancy rate to 3.2% in March, its highest level since September. However, the vacancies data is not seasonally adjusted, implying that the recent boost in hiring may not be sustained. Declining construction labour productivity, which decreased again in Q1 2026, has also added to underlying labour market pressures.

Machinery and equipment costs increased by 1.1% on the quarter, with notable upward pressure seen in power transmission equipment (+3.0%) and pumps and compressors (+2.4%). Diesel fuel prices also surged by 18.2% on the quarter in Q1 2026 amid escalating conflict in the Middle East, immediately feeding into higher operating and transportation costs for construction equipment.

Material costs, by contrast, declined by 0.4% on the quarter in Q1 2026, mostly driven by an outsized reduction in copper tube/pipe (-12.4%). Concrete-related products also fell, with ready-mixed concrete (-0.5%), paving (-4.8%) and masonry units (-4.9%) all falling on the quarter, likely reflecting the lull in civil engineering workloads. Steel also continued its downward trend, with pipe and tube prices falling by 3.2% in Q1 2026, as weaker residential demand and tariff-driven oversupply in the domestic market prompted discounting among Canadian suppliers.

Source: Statistics Canada

It appears, for now, that domestic material cost escalation has yet to fully emerge outside of energy-linked inputs – though this may reflect a lag in how global price pressures filter through into Canadian construction. May 2026 commodity readings from the World Bank point to continued increases across key base metals, while Canadian producer price indices grew by 1.1% in April 2026. This suggests that upward pressure is building and it may be a matter of time before more meaningful pass-through occurs in Canada. That, however, will be dependent upon supplier margins, manufacturing orderbooks and wider industry workloads. Nonetheless, upside risks remain.