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Canada’s construction industry has reported a notable increase in economic activity for the third quarter of 2026, revealing a sector that is both resilient and vulnerable. According to the Canadian Construction Association’s latest economic insights, the sector’s gross domestic product (GDP) reached an impressive $170 billion, marking a 1.3 per cent rise from the previous quarter—significantly exceeding the all-industry growth average of 0.5 per cent. This surge represents the most substantial quarter-over-quarter growth in three and a half years and underscores the ongoing expansion that has now persisted for six consecutive quarters.
Growth Driven by Engineering and Construction Activities
The report highlights that the driving force behind this growth primarily stems from engineering projects and various construction activities. Year-over-year, the sector’s GDP increased by 2.6 per cent, a figure that outpaces the general average of 1.1 per cent across all industries. This increase in productivity is commendable, particularly in light of the rising construction costs and ongoing supply chain disruptions that continue to pose significant risks to the industry.
One measure of these rising costs, the Building Construction Price Index, which assesses the expenses involved in constructing typical buildings in 15 major Canadian cities, increased by 4.2 per cent compared to last year. Key contributors to this price surge include escalated costs associated with metal fabrications, structural steel, and plumbing, with regions like London, Ontario, and Quebec City experiencing particularly steep increases. Notably, factory construction costs rose by 5.7 per cent, while office building expenses climbed by 3.2 per cent.
Trade Disputes Impacting Costs
The ongoing trade tensions between Canada and the United States have exacerbated these cost challenges. The report reveals that 16.4 per cent of construction firms have reported significant negative impacts due to Canadian tariffs on goods from U.S. suppliers. Meanwhile, 13.6 per cent of companies experienced major disruptions stemming from U.S. tariffs on Canadian imports.
The Canadian Construction Association’s report underscores the industry’s vulnerability to cross-border supply chains, especially for materials that are not readily producible within Canada. In contrast, a mere 6.5 per cent of firms reported positive impacts from the removal of interprovincial trade barriers, indicating limited benefits from domestic trade improvements. Furthermore, 9.6 per cent of construction companies had to alter their supplier arrangements due to trade disruptions, a trend expected to continue as the federal government’s 25 per cent global tariff on steel derivative products came into effect on December 26, along with the impending expiration of tariff remissions on January 31.
Workforce Challenges Looming Ahead
In addition to the financial hurdles, the construction sector is grappling with significant workforce challenges. BuildForce Canada estimates that the industry could face a shortfall of approximately 108,300 workers by 2034, a crisis that is largely attributed to an aging workforce and impending retirements. The Canadian Home Builders’ Association has indicated that about 22 per cent of residential construction workers are expected to retire within the next decade, further compounding this issue.
Rodrigue Gilbert, president of the Canadian Construction Association, remarked on the dual nature of the current landscape: “The opportunities ahead for our industry are significant, but so are the risks. Investments from the federal government will drive growth, but rising costs and workforce constraints will continue to limit the industry’s ability to unlock its full potential and deliver on Canada’s ambitious construction agenda.”
Why it Matters
The construction sector plays a critical role in Canada’s economic landscape, driving not only job creation but also infrastructure development crucial for future growth. While the recent growth figures are promising, the ongoing challenges from rising costs, tariffs, and workforce shortages threaten to undermine this momentum. Addressing these issues will be essential for the industry to sustain its trajectory and fulfil the ambitious goals set forth in Canada’s construction agenda. As the government and industry stakeholders work to navigate these complexities, the outlook for the future remains uncertain but holds significant implications for the broader economy.
