Following a surprising robust May (albeit revised down to 196,981 units) housing starts unexpectedly rose 3.0 percent to a 202,818 annualised unit rate in June, their highest level since July 2014.
The increase was largely attributable to a 2.7 percent advance in urban multiples to 130,933 units although singles also gained 2.0 percent to 57,787 units. Regionally, there were rises in British Columbia, Quebec, the Prairies and Atlantic Canada leaving Ontario to post the only decline.
Rural starts were estimated at a 14,098 unit rate, up from 14,040 units last time.
The June data make for a 6-month moving average of 183,959 units, a useful increase on May's 179,908 units and the strongest reading since January. Outside of the usual monthly volatility starts seem to be gradually rising and from a respectable enough rate to suggest that there is still plenty of life in the residential market. However, amidst increasing talk of possible recession in the second quarter, even a firm housing market may not be enough to prevent the BoC cutting interest rates again next week.
Housing starts is the annualized number of new residential buildings that began construction during the previous month.
Housing starts are a leading indicator of economic health because building construction produces a wide-reaching ripple effect. This narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments. Home builders usually don't start a house unless they are fairly confident it will sell upon or before its completion. Changes in the rate of housing starts tell us a lot about demand for homes and the outlook for the construction industry. Furthermore, each time a new home is started, construction employment rises, and income will be pumped back into the economy.
Once the home is sold, it generates revenues for the home builder and a myriad of consumption opportunities for the buyer. Refrigerators, washers and dryers, furniture, and landscaping are just a few things new home buyers might spend money on, so the economic "ripple effect" can be substantial. Since the economic backdrop is the most pervasive influence on financial markets, housing starts have a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the housing starts data carry valuable clues for the stocks of home builders, mortgage lenders, and home furnishings companies. Commodity prices such as lumber are also very sensitive to housing industry trends.
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