Highlights:
- Housing starts eased to 213k in December. The 6-month trend rate edged down to 207k from 212k in November.
Our Take:
Canadian housing starts remained at solid levels in December at an annualized 213k, although down from a stronger 224k in November. That starts were still strong in December is not so surprising given recent building permit issuance — which averaged 228k per month over the three months ending in October (the latest month available.) Starts fell sharply in Ontario and the Prairies in December, but were up in British Columbia. Most of the changes in the month were in the often-volatile multiple-unit component. Starts for 2018 as a whole came in at 213k. That is down from 220k in 2017 but was still just the third 200k+ annual rate over the last decade.
The new building data remains at odds with a larger pullback in home resales in 2018. We expect housing starts will ultimately follow suit and continue to look for an easing in activity to around 194k this year. That would still be a relatively strong pace of building activity historically and labour markets in Canada still look quite solid. Lower oil prices, though, are having an impact on growth in oil-producing regions and questions have emerged about the durability of the global economic expansion. At the same time, slower housing markets and slower growth in household debt has arguably removed some of the urgency for the Bank of Canada to hike interest rates in the very near-term. We continue to expect that further interest rate hikes from the central bank will ultimately be warranted, but very likely not as early as the policy rate decision later this morning.
