Defying the higher interest rate environment, housing starts topped expectations in September with an 8.0 percent rebound to an annual rate of 270,466 after declining 2.4 percent in August. Econoday's consensus was at 250,000.

Urban starts increased nine percent to an annual rate of 250,766, led by a 10% rebound in multi-unit starts. Single-detached urban starts were up three percent.

Regionally, Montreal starts surged 98 percent, while Toronto was up 20 percent. Single-detached activity declined 17 percent in Vancouver.

The six-month trend increased 3.9 percent to an annual rate of 254,006 after advancing 0.6 percent in August.

Canada Mortgage and Housing Corporation's chief economist said"it seems the current higher interest rate environment has not yet had the expected negative impact on multi-unit construction activity so far in 2023," not a welcome state for the Bank of Canada. In its minutes of the September meeting, the central bank had pointed out the dampening effect of higher interest rates on home builders"who reported difficulties in funding construction projects." It remains to be seen how the BoC will respond to this latest report.

Econoday's Relative Performance Index, at 15, is currently within a zone consistent with limited tightening risk.

Housing starts are expected to hold steady at 250,000 in September versus August's 252,787 which was higher than expected and reflected favorable financing that was locked in over prior months.

Released by the Canada Mortgage and Housing Corporation (CMHC), the monthly housing starts data capture the annualised number of new residential buildings that began construction during the previous month. Statistics are provided for urban and rural areas, the former with a population of at least 10,000. CMHC estimates the level of starts in centres with a population of less than 10,000 for each of the three months of the quarter, at the beginning of each quarter. During the last month of the quarter, a survey of these centres is conducted and the estimate revised.

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.