A new report released by consultants Linesight suggests that construction activity in Canada will contract by just under 1% in 2023, due to a series of factors, including reduced demand for housing, rising costs and shortages of skilled workers.

The company’s Canada Country Insight and Commodity Report for the first quarter of this year predicts moderate economic growth in Canada and a return to normal commodity escalation, but it warns that the industry still faces a number of key challenges, including long lead times for generators and specialist electrical equipment.

The industry’s bright spot is projected to be the industrial construction sector. Growth there is forecasted at 14.9% in 2023, supported by increased investment and permits for industrial construction, as well as the government's efforts to establish Canada as an industrial hub. The life sciences sector is also expected to grow due to investor interest and government policy support.

“The reduction in inflation rates is positive for the industry and the outlook is improving with lower energy costs, improved supply chain conditions and significant growth in infrastructure and mission critical investments,” said Patrick Ryan, executive vice-president for the Americas. “However, the ongoing lack of skilled workers in Canada continues to pose a risk for the construction industry.”

The data in the report also suggest that:

• Lumber prices have continued to drop in recent months from the highs reached in the first half of last year primarily as a result of the decreasing demand in the residential sector.
• Higher energy costs have been a key factor in the recent upward trend in cement and aggregates prices. Increased environmental regulations on production will contribute to further upward pressure on prices in the coming quarters.
• In addition to improved demand for steel, prices rose on the back of 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.
• Diesel prices dropped below CA$7 per gallon in March for the first time since February last year. With further drops in diesel prices will be contained.

“Residential construction continues to slow,” said Ryan, “but government investment in key sectors such as industrial will help boost the industry as a whole provided there is some easing of the current skilled labor shortages which is curtailing the growth opportunities.”