Canadian housing starts fell 16.3 percent to a seasonally adjusted annual rate of 245,791 in August from 293,537 in July, which was revised down from 294,085. The consensus in an Econoday survey of forecasters was 274,000, with the lowest estimate at 240,000.

The six-month trend was still up 1.6 percent to an annual rate of 267,259 units. But further weakening in the month-to-month data would confirm Canada Mortgage and Housing Corporation's projection of a slowdown in construction activity.

The report also added that"current housing starts levels are generally reflective of decisions made when interest rates were receding and investor confidence was higher than it is today."

Starts are expected to recede to 274K August from a surprisingly strong 294K in July.

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.