CONSTRUCTION INPUT COST ANALYSIS
Low and steady increases
Construction input costs grew by 0.7 percent in Q2 2025 after increasing by 0.2 and 1.2 percent in Q4 2024 and Q1 2025, respectively. A complex interplay of trade policy, labour rigidity and ongoing uncertainty in the market has contributed to overall growth. Yet lingering effects on material prices from the pandemic remain the primary drive leaving input costs locked at 31.5 percent above pre-pandemic levels. Increases, however, are relatively benign and in line with historic norms, which should build a degree of comfort and stability when cost planning and estimating.
Source: Statistics Canada
Material costs increased by 0.7 percent on the quarter in Q2 2025 – the first quarterly increase since Q2 2024. While overall growth is not dramatic, it may hide more significant variations within key entries that constitute it. As an example, copper pipe and tube prices surged by 27.5 percent. This spike was driven by strong demand from mechanical and electrical trades, constrained global supply and recent US import tariffs that have tightened availability and pushed up costs.
In contrast, lumber prices fell sharply, down 18.1 percent on the quarter, stemming from a combination of subdued residential demand in North America and product oversupply. With US housing starts softening and interest rates remaining elevated, demand for Canadian exports has waned. Canadian mills also appear to be offloading stock at discounted prices to avoid prolonged holding costs.
Source: Statistics Canada
Labour costs continued their steady upward trajectory, with average weekly earnings rising by 1.0 percent in Q2 2025. This growth is now underpinned by newly ratified union wage agreements across multiple provinces, which will lock in annual increases for several years. However, the broader labour market is being placed under greater duress which could have implications for wage growth.
The unemployment rate in construction increased to 6.7 percent in Q2 2025, driven by overarching economic uncertainty and a thinning out of contractor orderbooks. Apprehension has also filtered through into hiring decisions, with vacancies dropping to 3.1 percent in Q2 2025 – their lowest value since Q4 2017. Productivity growth also remains muted, increasing by 0.3 percent on the quarter but still down 7.0 percent over the last ten years.
Machinery and equipment costs contracted by 0.4 percent in Q2 2025, although not deviating substantially from its long run trend. This was led by a 1.7 percent drop in medium and heavy-duty truck prices, likely driven by high inventories and softening freight demand. On the other hand, power transmission equipment rose by 3.3 percent, its largest quarterly increase in three years, due to ongoing grid modernization efforts.
Looking ahead, input cost volatility remains a key risk and will influence the cost environment. Tariff impacts are still unfolding, and while some categories may see temporary relief, structural pressures could keep costs elevated. Increasing labour market slack should eventually offer some respite, but pre-existing productivity challenges may amplify efficiency concerns and long-term capacity constraints.
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