Executive summary
Costs continue to rise despite construction sector weaknesses
Canadian Gross Domestic Product (GDP) continues to grow when looking at top-line quarterly metrics. However, looking behind the numbers reveals a more vulnerable economy. Conversely, key data points paint a surprisingly weak picture for Canada’s construction industry.
Both the Canadian economy and construction industry are facing similar struggles against the current high-cost and elevated interest rate environment. Financing costs remain high, liquidity constrained and capital flows are lower - all of which have conspired to reduce consumption, hold back the economy and impair the residential and commercial sectors performance.
Institutional, governmental, and infrastructure workloads, albeit impacted by cost pressures, look to offer a firm backbone to support industry success. A pick-up in growth within Quebec, particularly from a residential perspective, should offset some of the cooling found in Alberta’s market recently, as Canada benefits from its provincial diversity.
On the cost side, escalation remains problematic. Construction costs in Canada are expensive and labour, material, and machinery and equipment costs rise further. That pace of growth is subdued, helped by a softening of demand and recalibration of supply chains.
Bid prices are also starting to be affected by construction’s muted outlook and competition within tenders is increasing, with prices growing at a lower rate.
The construction industry’s prospects remain optimistic overall, yet are subdued as the economy cools, domestic and international political pressures rise and costs remain elevated.
