Canada market intelligence: mounting pressure
Our Q3 2024 Canada market intelligence report provides market and provincial analysis for the region, as well as economic insights from our team of experts. See our summary below and read the full report to learn more.
Economic and construction market overview
Canadian Gross Domestic Product (GDP) continues to grow when looking at top-line quarterly metrics. However, looking behind the numbers reveals a more vulnerable economy. Conversely, key data points paint a surprisingly weak picture for Canada’s construction industry.
Both the Canadian economy and construction industry are facing similar struggles against the current high-cost and elevated interest rate environment. Financing costs remain high, liquidity constrained and capital flows are lower — all of which have conspired to reduce consumption, hold back the economy and impair the residential and commercial sectors' performance.
Costs continue to rise despite construction sector weaknesses
On the cost side, escalation remains problematic. Construction costs in Canada are expensive and labour, material, and machinery and equipment costs rise further. That pace of growth is subdued, helped by a softening of demand and recalibration of supply chains.
The construction industry’s prospects remain optimistic overall, yet are subdued as the economy cools, domestic and international political pressures rise and costs remain elevated.
How market conditions are shaping escalation forecasts
Construction escalation continues to grow. Labour, machinery, and equipment and material costs increased on the quarter and remain elevated. The rate of growth, however, is low and the strength of prior constraints are easing. Factors informing our escalation forecasts are:
- Current activity: low and slow growth. Areas of positivity exist, yet it is weak overall.
- Leading indicators: new starts constrained, albeit confidence should grow via rate reductions.
- Materials cost and availability: commodity, freight, and general material costs have picked-up.
- Workforce: softer wage growth in a cooling labour market. Skills shortages persist.
- Machinery and equipment: stubborn increases on the quarter maintain cost pressures.
From a macroeconomic perspective, not much has changed, however. The Canadian economy is a somewhat stronger and Canada’s construction industry is a somewhat weaker, while input cost growth continues to be a key factor driving our escalation forecasts.
Contractor behaviour is starting to shift however, as bid prices are becoming more competitive, spreads are lowering and more firms can appear on tender lists.
Some contracting firms may well be looking to bid strategically depending on project complexity, sector specific nuances and supply chain maturity. As such, our predictions for 2024 move down to 3.0 percent.
