Canadian housing starts fall in July, likely to stay elevated in near-term

Canada’s housing starts dropped in July. The starts fell 16 percent on a sequential basis to 206k from June’s 246k level. The rate was below expectations of a smaller fall to 219k. The underlying trend dropped slightly to 220k. Single-detached starts fell 3 percent to 66k units. Unsurprisingly, the volatile multi-family segment led the overall fall, dropping significantly after June’s strong gain.

Urban starts dropped in six provinces out of ten. Homebuilding pulled back considerably in Ontario, with urban starts falling 35k to 66k units. Starts also saw a major fall in Quebec and Saskatchewan and three of four Atlantic Provinces. On the contrary, comparatively strong gains were seen in Alberta and B.C. Starts fell markedly in Toronto and Montreal. Meanwhile, starts rose in Vancouver.

Starts fell considerably in July as anticipated, albeit by more than markets expectations. Nevertheless, the monthly data could be noisy and homebuilding continues to be sound when seen on a trend basis, noted TD Economics.

July was the first month where retaliatory tariffs on steel and aluminium imports from the U.S. were in effect, which possibly raised construction costs faced by Canadian builders. While this is negative for homebuilding, the rate seen in July was still healthy and starts look likely to stay elevated in the near-term.

“All told, today's report matches our expectation that starts will pull-back closer to the more fundamentally supported 200k mark in the second-half of 2018, as higher interest rates and regulatory changes continue to limit demand”, added TD Economics.

At 17:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was neutral at 10.8648, while the FxWirePro's Hourly Strength Index of US Dollar was highly bullish at 103.859. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex