What do current market conditions mean for our escalation forecasts?

Tariff-induced uncertainty continues to preside over Canada’s economy, and its construction industry, denting confidence, curtailing investment decisions and progressively influencing bid price dynamics. Factors informing our escalation forecasts are:

• Economy – A sluggish economy is being supported by lower inflation and improving affordability. Targeted fiscal stimulus should bolster industry growth.
• Construction – Investment appetites are subdued, with workloads strained by ongoing trade policy undercurrents. Private sector sluggishness partially offset by public expenditure.
• Input costs – slow and steady increases, with variability across labour, materials and machinery and equipment. Tariff impact has yet to truly be realized.

Our national forecast for 2025 has edged down slightly from 2.0 percent to 1.75 percent. Despite pricing volatility and estimating variability subsiding, anxiety about pipeline security has fed into increasing competition and softer pricing. Input cost increases, however, are still being passed through the supply chain and act as a counterweight to weaker demand.

This downwards revision continues into 2026, with our bid price prediction transitioning from 3.0 to 2.5 percent as subdued GDP and limited project activity constrain industry price pressure. However, this is likely to be more acute at the end of 2025 and start of 2026. Improving affordability, mellow input cost growth and increased trade clarity should then filter through into a recovery of investment appetites as the year progresses.

Lagged fiscal stimulus and federal investment should see escalation proformas pick up in 2027 alongside a release of private sector pent-up demand. National building infrastructure projects and programs could also accelerate skill shortages and worsen supply chain bottlenecks, applying a premium on strained resources. As a result, our forecast has shifted up to 4.5 percent from the 3.5 percent recorded in our Q2 2025 Canada market intelligence report.

Bid price variability will persist over the forecast horizon, and deviations from our national average will emerge on a project-by-project basis. While downward pressures are still pronounced, we’re proposing a range of escalation outcomes +/-2.5 percentage points around baseline predictions as uncertainty persists.

Provincial forecasts for 2025 have been revised as well. Ontario has experienced the main shift, reducing from 2.0 to 1.5 percent due to its trade sensitivity with notable housing market exposure. Escalation in British Columbia, Quebec and Alberta remain the same, increasing by 2.0, 2.5 and 2.5 percent, respectively. These forecasts are visualized in Figure 9 below, with additional context available in our provincial commentaries.