Canadian housing starts proved more resilient than expected in May coming in at an annual rate of 279,510 following 280,181 in April, revised up from 278,606. The highest forecast in an Econoday survey was 255,000, with a consensus at 253,000.

The six-month trend was up 0.8 percent to an annual rate of 243,407.

Actual starts rose 9 percent year-over-year in centers with a population of 10,000 or more.

While housing starts showed more resilience than expected, they were still down 0.2 percent on the month, when the construction sector shed 7,400 jobs. As pointed out in the Bank of Canada's Financial Stability Report in late May, there are persistent imbalances in the housing market as supply hasn't kept up with rapid population growth in recent years. The Trudeau government took measures to curb immigration to that effect. The newly elected Carney government has tabled legislation to eliminate the Goods and Services Tax (GST) for first-time home buyers on new homes up to $1 million and reduce the GST for first-time home buyers on new homes between $1 million and $1.5 million. The impact remains to be seen as unemployment continues to rise in Canada, reaching 7.0 percent in May, its highest level since September 2016 (excluding the 2020 and 2021 pandemic years).

Starts are expected to fade to 253,000 in May after rising to 279,000 in April from 214,000 in March.

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.