EXECUTIVE SUMMARY

An improving economy under pressure

Canada's economy bounced back in Q2 2026 as stronger exports and domestic demand helped offset weaknesses seen earlier in the year. However, the outlook remains clouded by trade uncertainty and geopolitical tensions, which continue to weigh on business sentiment and investment decisions.

Construction activity also improved, supported by sustained infrastructure investment and resilient engineering workloads in several regions. Public-sector spending remains a key source of stability as market conditions diverge across sectors.

Input cost pressures have strengthened as energy markets and supply chains reacted to ongoing geopolitical instability. Materials and machinery and equipment costs moved up with tariff tensions threatening the immediate outlook, while pockets of skilled labour shortages continue to affect labour supply, elevating construction costs.

As a result, escalation risks have become increasingly skewed to the upside. While competitive tendering and uneven demand continue to moderate price growth in some sectors and regions, tariffs, uncertainty and instability are expected to place additional strain on pricing.