Upbeat Canadian housing starts a indication that the economy was thawing in May

Canadian housing starts rose to 201,700 annualized units in May, ahead of expectations, versus 183,300 in the prior month (revised up a touch from 183,100). After a blowout employment report on Friday, this is a second indication that the Canadian economy was thawing in May, similar to trends seen in the U.S. (though Canadian autos sales were not nearly as strong as those south of the border in the month).

In a separate release, building permits rose 11.6% in April, with a gain in residential multis flagging the jump in starts reported for May. While residential permits were up a sturdy 7.5% y/y through the first four months of the year, nonresidential permits were up a much more modest 1% y/y as strength industrial permits offset declines in the commercial sector.

"For homebuilding, we've seen these seasonal swings already in each of the past two years, and the smoothed-out level of activity is still consistent with demographic demand. Two standouts at the regional level are Alberta, where activity has shifted to a more subdued pace after a strong 2014, while Toronto's condo sector is following the opposite track (a lull last year that has now clearly reversed)." notes BMO Capital Markets