Housing starts expected to show continuing recovery, trade to stay in the red

Monday, February 8th, 2010

Derek Abma

This week’s economic data are anticipated to show continuing recovery in Canada’s new-housing market, although the country’s trade balance is expected to remain in negative territory.

Today, Canada Mortgage and Housing Corp. reports housing starts from January. Economists expect the annual rate of starts to come in at about 180,000. If correct, that would mark the fourth straight month of gains and further distance the sector from the low of just above 120,000 reached in April, according to recently revised figures.

December’s housing-start results were revised upward to 177,800.

“This upward momentum in residential construction activity is expected to continue in January,” said TD Economics economics strategist Millan Mulraine. “Unseasonably warmer weather and the strong recovery in demand for housing are expected to be the main factors pushing construction higher.”

Mulraine added that past building-permit data also point to a boost in housing starts for January.

Both Mulraine and CIBC economist Peter Buchanan are close to the consensus of their peers, calling for a housing-start rate of 180,000 in January.

“After a year that started like a lamb but ended with on a lion-like note, the building blocks still appear to be in place for further improvement,” Buchanan wrote in a research note.

On Wednesday, Statistics Canada reports trade figures for December. The balance is anticipated by most economists to come to a deficit of $200 million, coming after a deficit of $344 million in November. If economists are right, it would be the fifth deficit in six months.

Up until December 2008, Canada had not seen a monthly trade deficit in more than 30 years.

Mulraine predicted the December trade figures would show a surplus of $300 million, still considered fairly close to flat at less than $1 billion.

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