Canadian May housing starts suggest boost for economy

Mon Jun 10, 2013 10:37am EDT
 
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By Jeffrey Hodgson

TORONTO (Reuters) - Canadian housing starts jumped much more than expected in May from April, the Canada Mortgage and Housing Corp said on Monday, in the latest sign that the broader economy is gaining momentum in the second quarter.

The seasonally adjusted annualized rate of housing starts was 200,178 units in May, an increase from 175,922 in April. The April figure was revised upward.

Analysts polled by Reuters had expected 178,100 starts in May.

The housing starts data was the most recent report to suggest Canadian economic growth is picking up after struggling in the second half of 2012. A separate report on Friday showed the economy added 95,000 jobs in May, the second-biggest gain in 37 years.

With the pickup in starts, residential construction may contribute to Canadian economic growth in the second quarter for the first time in four quarters, wrote Krishen Rangasamy, senior economist with National Bank.

MORTGAGE RULE CHANGES BITE

The six-month trend level in housing starts was 182,756 units, little changed from a month earlier, suggesting the downward slope in homebuilding since the middle of 2012 may be starting to level off.

"Multi-unit housing starts came storming back in May after falling precipitously through the winter months. Still, the 6-month trend in overall Canadian housing starts sits very close to demographic demand, further hinting at a soft landing," Robert Kavcic, a senior economist with BMO Capital Markets, wrote in a note to clients.   Continued...

 
A builder works on the the roof of a new home under construction in the Montreal suburb of Brossard August 10, 2010. REUTERS/Shaun Best