The Canadian home building sector warmed up again in January from a winter chill that slowed activity in December. Builders kicked off the New Year by pouring the foundations for 222,700 new housing units (annualized rate), an above-expected level and close to the average over the past year.
However, key details of the report raised some questions, as the entire monthly increase came from the typically volatile multi-unit segment (up 64%). Single-unit starts actually fell 4.8% to their lowest level in more than six years. While this likely reflects an ongoing shift towards multiples in the face of growing land constraints in densely populated areas of the country, it is bound to make starts quite bumpy going forward.
Regionally, gains were registered in Central and Western Canada in January. All provinces in Atlantic Canada posted declines.
The Bottom Line: Combined with strong employment numbers released earlier this morning, this report suggests that economic activity picked up in January after a short end-of-year break in Canada. Even so, housing construction is expected to slow moderately during 2008, which will restrain growth in coming quarters.
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A. Mark Argentino
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