August 27, 2008
Economy at a Glance, August 28, 2008
Canada’s housing starts plunge in July
Canada Mortgage and Housing Corporation (CMHC) has announced a sharp pull-back in housing starts in the latest month, to 187,000 units (seasonally adjusted at an annual rate) in July 2008 versus 216,000 units in June. Year-to-date starts (-2.0%) have now fallen slightly behind last year’s comparable level. The most likely outlook is that the shortfall versus last year will continue to widen as the year progresses.
Latest indicators suggest that job prospects are weakening. Interest rates are unlikely to drop any further, with inflation above 3.0% in Canada and at almost 6.0% in the United States. However, one glimmer of hope for the economy’s future lies in the current fall-back in commodity prices. This is due to the slowdown in the world economy that has spread over from the U.S. subprime mortgage mess and financial market meltdown. Quieter activity in commodities trading will be welcome after the speculative excesses that have hurt business and consumer confidence.
So far this year, the single-detached housing market (-15%) has been affected to a considerably greater degree than the multiple-unit market (+19%). Singles carry a higher ticket price than multiples and this has undoubtedly played a role in shaping where new demand has been focused. At the same time, both market segments have an excess of unsold inventory.
For more articles by Alex Carrick on the Canadian and U.S. economies, visit his blog and Market Insights.
Canada Monthly Housing Starts
(Seasonally Adjusted at Annual Rates)
Inventory of Completed but Unoccupied Dwelling Units:
Centres in Canada with Populations of 50,000 or More
Data source: Canada Mortgage and Housing Corporation (CMHC)/Chart: Reed Construction Data - CanaData.
