US Q3 GDP tracking 2.7% after strong July housing starts

US housing starts rose 0.2% m/m in July, to 1.206mn. Multi-family family starts fell 17.0% m/m in July, given the surge in June from the expiration of a tax incentive in the Northeast region. 

While permits for the sector returned to their previous trend, multi-family starts remain elevated and likely have further room to fall, in our view. Single-family starts grew a robust 12.8% m/m in July, well above our expectation for a modest monthly improvement. The regional breakdown of starts shows similar strength. 

"Construction activity is picking up across the country, which can be taken as positive signal about the health of the US consumer and overall economy. The stronger-than-expected gain in single-family starts for July implies a stronger Q3 profile for single-family construction spending", says Barclays. 

Single-family construction accounts for about 35 percent of total residential investment. The Northeast region remains elevated (161k, previous: 222k), while the Midwest (179k, previous: 149k), South (589k, previous: 547k) and West (277k, previous: 286) all posted solid results in July. Trend readings of single and multi-family starts activity show notable improvement in recent months. 

"Thus, stronger starts and construction boosted our estimate of residential investment and added 0.1pp to our Q3 GDP tracking estimate, bringing it to 2.7%", added Barclays.