Toronto, ON — The construction industry is expected to contract by 0.9 per cent in 2023 despite the Canadian economy being expected to grow by 1.4 per cent. This is largely due to reduced residential output, elevated construction costs, and the skilled labour shortage, according to a report conducted by Linesight titled “Canada Country Insight and Commodity Report for Q1 2023.”
Data taken from the report notes that the outlook for the housebuilding sector is gloomy, with high-interest rates and falling building permits indicating a decline in construction works in the coming quarters.

The report also acknowledges that increased costs for materials are a cause for concern.
Lumber prices are expected to continue to drop in the coming months from the highs reached in the first half of last year, primarily due to the decreasing demand in the residential sector.
Despite an improved demand for steel, prices rose due to higher input costs, lower import volumes and reports of domestic mill production delays. However, with supply improving, prices are set to fall from recent highs posted in late March.
Higher energy costs have been a key factor in the recent upward trend in cement and aggregates prices. Over the medium term, higher costs due to increased environmental regulations on production will contribute to further upward pressure on prices, according to the report.
Despite weak demand in the building construction sector, brick manufacturers have been passing on higher production costs to buyers. Asphalt prices dropped sharply in Q4 of 2022 and remained low on a quarterly average basis in Q1 2023.
However, the report also states that Canada’s industrial construction sector is expected to grow 14.9 per cent in 2023, thanks to increased investment and permits for industrial construction, as well as the government’s efforts to establish Canada as an industrial hub.
The report also highlights that inflation is expected to decrease in the near term, with the Bank of Canada anticipating a decline to around three per cent by the middle of this year due to lower energy prices, improved supply chain conditions, and tighter monetary policy.