Are housing starts rebounding?
Consensus is looking for Canadian housing starts numbers for the month of June to come in near 190k, down from the strong 198.3k in May but still stronger than levels seen earlier this year when a mix of harsh weather and uncertainty weighed on overall levels of construction, driving housing starts to an annualized low of 157k in March.
We wouldn’t make too much of the very soft levels of construction during Q1: Canada’s weather is very harsh in the winter, and the low seasonally adjusted monthly housing starts numbers seen during Q1 didn’t actually represent a massive decrease in the quantity of housing starts that the country will actually see in 2014.
As we noted at the time of the weak March housing starts number (157k), in unadjusted terms, the first three months of the year only constitute 18-20% of the cumulative quantity of housing starts that typically happen over a full 12-month stretch. Peak housing starts months in absolute terms occur in May through July, with those months typically averaging 55-60% more actual starts (not seasonally adjusted) than is typical during Q1. In other words, the strong numbers that we’re seeing for Q2 are much more important than the weak numbers that we saw for Q1 and represent much more actual building.