Canadian housing starts bounced back in January after declining in the previous month coming in at an annual rate of 240,000 (239,739 to be exact), compared to December's 232,000 (revised up from 231,000 previously reported), and below expectations for an annual rate increase of 250,000 in the Econoday survey of forecasters.

Housing starts had been trending upwards since August, but with the decline at the end of the year followed by this slight rebound, it remains to be seen if there is a sustained pickup in housing activity after the Bank Canada's aggressive actions to loosen credit conditions.

Starts are expected to recover to a 250,000 rate at the start of the year after slipping to 231,468 at an annual rate in December from 267,140 in November.

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.