EXECUTIVE SUMMARY

Fragility fears

Canada’s economy remained under pressure in Q1 2026, with GDP stagnating and labour market conditions softening. Weak consumer confidence, ongoing trade uncertainty and rising energy prices continue to weigh on growth prospects, reinforcing a muted economic backdrop.

The construction industry showed its first signs of struggle amidst this volatile environment as activity fell in Q1 2026. Private investment displayed further signs of weakening foundations as the residential sector performance worsened, while public expenditure helped secure the floor under the broader industries weakness.

Input cost growth remains modest for now but is beginning to shift, with material costs set to increase as energy costs rise and global commodities trend upwards. The ability of the new US-Iran interim ceasefire deal to de-escalate tensions and recalibrate supply chains will be critical in the evolution of input costs and bid prices.

As a result, escalation is set to move up in 2026 as cost rise amid persistent geopolitical tensions, adding further pressure on tender submissions. Demand conditions, however, are subdued, holding back overall price growth, while escalation risks remain tilted to the upside.