* Housing starts show market is cooling
* New home prices up for 18th month in a row
* Trade deficit narrows but export volumes sluggish
* Data points to slower economic growth, analysts say
OTTAWA, Nov 8 Canadian housing starts fell more
sharply than expected in October, according to data on Thursday
that confirms a welcome slowing in the country's once-booming
property market after the government repeatedly tightened
Other data from Statistics Canada showed new home prices
continued their modest rise in September while the trade deficit
narrowed in that month on an oil-led export recovery.
Markets focused on the housing starts, which were down 8.9
percent from a year earlier as both single and multiple urban
housing starts slumped, Canada Mortgage and Housing Corp (CMHC)
The seasonally-adjusted annualized rate of housing starts
was 204,107 units in October, down from 223,995 in September and
18.9 percent below the cyclical peak reached in April.
"The October move was the most decisive one yet that a
housing correction is under way," said Jonathan Basile, director
of economics at Credit Suisse Canada.
Analysts polled by Reuters had forecast starts would decline
to 211,500 in October.
The report echoes a string of data that the Canadian housing
market is cooling, but does not appear to be heading for a crash
landing as happened in the United States.
Housing prices and construction roared higher in 2011 and
the first half of 2012, aided by low interest rates. The market
started slowing after the government tightened rules on mortgage
lending in July for the fourth time since 2008 in a bid to
prevent home buyers from taking on too much debt.
The most scrutinized aspect of the CMHC report was the sharp
drop in starts of multiple-family units, as analysts look for
clues that overbuilding in the Toronto condo market is waning.
In urban areas, starts fell 10.1 percent at a seasonally
adjusted annual rate, to 182,134 units in October. Urban singles
starts decreased 7.6 percent while multiple urban starts dropped
"While multi-unit starts are extremely volatile
month-to-month, this downshift to the lowest level since
February could be an early indication that momentum is fading in
the sector," said Robert Kavcic, economist at BMO Capital
While fading momentum is what policymakers hope for, it also
means the housing market will not be as powerful a driver of
economic growth as it was.
"The sector will likely remain a drag on growth through much
of 2013, a stark shift from recent years," Kavcic said.
Prices of new homes in Canada rose for the 18th consecutive
month in September, increasing by 0.2 percent from August and by
2.4 percent on the year.
Canada's struggling exports are also expected to be a drag
on growth in the third quarter as the trade deficit grew in
volume terms even though it narrowed in dollar terms.
The trade deficit narrowed unexpectedly to C$826 million
($826 million) in September as exports increased by 1.9 percent
while imports were unchanged. Canada's surplus with the United
States grew to C$3.47 billion from a revised C$3.25 billion in
The overall increase in exports reflected a 4.2 percent jump
in energy shipments, mainly crude oil and crude bitumen. But
much of the export gain was due to price hikes, and export
volumes were much less impressive.
"Today's report suggested that the hit to growth will likely
be larger than previously estimated," said Dawn Desjardins,
assistant chief economist at RBC Economics.
Imports were flat, with higher imports of metals and
chemicals compensating for lower shipments of consumer goods and