Canadian housing starts were stronger than expected in July, rising 3.7 percent to a seasonally adjusted annual rate of 294,085, topping the highest forecast of 281,000 in an Econoday survey. June's estimate was little changed at 283,523 from an initially reported 283,734.

The six-month trend was up 3.7 percent to an annual rate of 263,088.

Actual starts increased 4 percent year-over-year to 22,610 in centers with a population of at least 10,000. Montreal recorded a surge of 212 percent year-over-year, driven by multi-unit starts, which by contrast fell in Toronto, where actual starts plunged 69 percent year-over-year.

Multi-unit starts in Quebec and the Prairie provinces, which include Manitoba, Saskatchewan and Alberta, have helped housing starts remain above their 2024 levels year-to-date.

The housing market also showed signs of momentum in existing home sales, which climbed 3.8 percent in July from June, for a cumulative increase of 11.2 percent since March. The July gain was largely led by the Greater Toronto Area (GTA), where transactions have now rebounded a cumulative 35.5% since March.

In July, however, construction employment dropped 21,600. It remains how it will translate into housing starts ahead.

Starts are expected to correct lower to 270,000 in July after recovering for several months to a recent high of 283,734 in June.

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.