Housing market will weigh on Canadian real GDP growth in Q1 2015

Canadian housing starts declined sharply in Feb, falling 16.4% m/m to 156K units, the largest decline since March 2014. On a yoy basis, the picture was even more dire, with housing starts declining 18.8% over year-ago levels.

However, the trend measure of housing starts in Canada (a six-month moving average) was 182K units in Feb, down only 3.5% from the prior month. Although Feb's print is the fifth consecutive monthly decline and the weakest monthly showing since the first quarter of 2013.

TD Economics notes in its report on Monday:

• Any way you slice it, today's housing starts release was among the weakest prints we have seen in some time. While in part weather induced, thanks to the harsh Feb weather in much of Canada, the trend is clearly toward weakness in the housing market. This view is supported by other housing market data released in recent months, including existing home sales and prices.
  
  
• As a result, we expect that the housing market will weigh on real GDP growth in the first quarter of 2015. This is despite the recent BoC rate cut, which will likely only have a small impact due to its modest size. 
  
  
• That said, we believe that the 25 basis point insurance policy taken out by the BoC in Jan will prove sufficient to ensure that the Bank reaches its objectives for inflation and growth. Consequently, we expect that the BoC will remain on hold until the final quarter of 2016.