(Adds economist, analyst comment; regional details)
By Andrea Hopkins
TORONTO, July 9 Canadian housing starts rose in
June, bucking expectations for a modest slowdown in the month
and suggesting the building sector added to economic growth in
the second quarter after a brutal winter, data released on
A report from the Canada Mortgage and Housing Corp showed
the seasonally-adjusted annualized rate of housing starts rose
to 198,185 last month from a downwardly revised 196,993 units in
That gain, the third consecutive month with starts close to
the 200,000 mark, surpassed analysts' forecasts for a decline
to 189,000. May was originally reported as 198,324.
The bounceback in the second quarter followed a slide of
nearly 10 percent in the first three months of the year, when
cold temperatures and icy conditions sideswiped builders.
"Smoothing out the very volatile and weather-impacted first
half of the year, starts averaged 186,000 through June, roughly
in-line with demographic demand. In all likelihood, activity
will gravitate back toward that level, or slightly lower,
thorough the remainder of the year," BMO Capital Markets senior
economist Robert Kavcic wrote in a research note.
Economists said the report suggests construction will boost
gross domestic product (GDP) growth in the second quarter.
"(It) gives us more confidence that the weakness seen in
April GDP due to a drop in construction was indeed transitory,
and that for the second quarter as a whole, the building sector
- along with other economic activity - will show signs of
heating up," said Nick Exarhos, an economist at CIBC World
CMHC Chief Economist Bob Dugan said the trend in housing
starts has been stable since March, down from the range of
191,000 to 196,000 seen between September 2013 and February
"This is in line with CMHC's analysis indicating that the
new home construction market in Canada is headed for a soft
landing in 2014," Dugan said in the report.
The report showed single-unit starts rose 0.9 percent while
multiple-units, typically condominiums, rose 0.1 percent.
Canada's condo market has cooled since 2012 after a multi-year
boom, and is widely expected to cool further as unsold inventory
comes onto the market.
"We expect starts to ease to 185,000 annualized units in the
fourth quarter, as elevated inventory levels and oncoming supply
dampen construction activity. Next year, we expect that interest
rate pressures will be more acute, so housing construction
should slip further," Mazen Issa, senior Canada macro strategist
at TD Securities, said in a research note.
June's strength in housing starts was led by the prairie
provinces of Alberta, Saskatchewan and Manitoba, which are
benefiting from a booming resources sector and where an influx
of workers has meant a shortage of housing in several cities.
Starts declined in Quebec, Ontario and British Columbia, and
were up in the small Atlantic market.
(Additional reporting by Leah Schnurr; Editing by W Simon and