CONSTRUCTION INPUT COST ANALYSIS
Cost pressures rise amid energy and trade disruptions
Construction input costs rose by 2.1% on the quarter and 3.4% on the year in Q2 2026. This was the largest quarterly increase since Q1 2022, and a notable acceleration from the relatively stable cost environment seen over the previous year. All core construction cost components picked up with notable increases in materials and machinery and equipment as oil and energy prices surged in March following escalations in the Strait of Hormuz.
Source: Statistics Canada
Material costs felt the brunt of recent market disruptions, increasing by 2.6% on the quarter and nearly 4.0% on the year in Q2 2026. Mechanical and electrical components rose 6.1% on the quarter, driven primarily by higher copper costs as global supply conditions tightened. Extreme weather disruptions in key producing regions and growing international competition for the metal have added upward pressure to prices. Asphalt paving, roofing and saturated materials are another set of construction components under duress as direct derivatives and byproducts of oil and bitumen. Some iron and steel products also remain exposed to trade-related uncertainty, with steel pipe and tube prices rising 4.5% on the quarter.
Meanwhile, machinery and equipment costs rose 1.9% on the quarter and 3.5% on the year, mostly driven by higher energy costs. Notable movers include power transmission equipment, up 5.3% on the year in Q2, as well as pumps and compressors, which increased by 6.0% over the same period.
Labour costs also picked up in Q2 2026, with average weekly earnings increasing by 1.5% on the quarter. The unionized wage index likewise signalled strengthening labour cost pressures, as negotiations between March 2026 and May 2026 resulted in a 2.5% increase relative to prevailing wage rates a year earlier. Labour availability remains a challenge in certain trades, particularly electrical and mechanical specializations, as industry experts continue to highlight weaknesses in the training pipeline. Coupled with rising vacancies and subdued productivity growth, these dynamics point to increasing competition for skilled labour.
Source: WB, Freightos, FED, EPU, Statistics Canada. Note: GSCPI on secondary y-axis
While global supply chain and risk indicators have moderated from the extreme levels observed earlier in 2026, cost pressures and uncertainty remain elevated. International freight costs (Freightos), Brent crude oil prices and policy uncertainty measures all remain firmly above year-earlier levels, reflecting a global operating environment that continues to place pressure on supply chains and costs.
Construction projects remain exposed to a range of imported materials and equipment, including steel, aluminum, electrical products and machinery, although the magnitude of any resulting cost impact varies considerably by project type, procurement strategy and supply chain mix.
Looking ahead, the protracted conflict in the Middle East and renewed Canada-US trade tensions are expected to keep procurement conditions uncertain and pose ongoing upside risks to construction input costs through the remainder of 2026.
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