CA: Housing Starts

July 11, 2016 07:15 CDT

Consensus Actual Previous Revised
Level 191,000AR 218,333AR 188,570AR 186,709AR

Housing starts were significantly stronger than expected in June. A 16.9 percent monthly bounce took the level up to 218,333 units (saar) from a slightly softer revised 186,709 units in mid-quarter.

The sizeable jump reflected an 18.1 percent monthly gain in urban starts to 202,702 units within which multiples were up fully 26.7 percent at 142,819 units and singles 1.7 percent firmer at 59,883 units. Regionally there were increases in British Columbia, Ontario and the Prairies but falls in Quebec and Atlantic Canada.

Rural starts were estimated at 15,631 units after a 15,053 unit rate in May.

The June data put starts at an average 198,809 units last quarter, hardly changed from 197,799 units in the preceding three months and certainly indicative of a still very robust housing market. This should be one factor ensuring that the BoC remains cautiuous about cutting interest rates again on Wednesday.

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.