Canadian housing starts fall sequentially in August, residential investment likely to add to economic growth

Housing starts in Canada fell in August. Starts dropped 2.3 percent sequentially to 201.k from July’s 205.8k level. August’s figure came in below expectations of a rise to 216k. On a longer-term six moth moving average basis, starts dropped to 215k.

Single-detached starts fell 3 percent to 64k units, while multi-family construction dropped 2 percent to 137k. Urban starts fell in half of the provinces. In Quebec, homebuilding dropped markedly, with urban starts falling 6k to 28k units. Starts dropped even in Ontario to 61k units.

On the contrary, gains were seen in Saskatchewan, Alberta and B.C. to 3k units, 32k units and 46k units. Starts fell markedly in Toronto to 29 units, whereas it fell to 12k units to 25k units in Montreal and Vancouver.

The moderation in homebuilding in August is in line with the view that starts might dropped from their elevated first-half rate to a pace more consistent with underlying fundamentals, stated TD Economics in a research report. However, homebuilding continues to be sound when seen on a trend basis, underpinned by strong population growth and strong economic conditions. Furthermore, strong permit issuance points to homebuilding maintaining a sound pace in the near-term.

Housing starts are averaging 203k for the third quarter, weaker than the 218k rate averaged in the second quarter. This implies that the new housing construction component of residential investment would be slightly weaker in the third quarter.

“Still, residential investment overall is likely to add to growth, driven by rising resale activity”, added TD Economics.

At 15:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was highly bullish at 144.595, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 5.19522. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex