US June housing starts: stronger than expected - Nomura

Analysts at Nomura offered a review of the key US data from the US shift.

Key Quotes:

"Housing starts: 

The June housing starts report suggests a decent improvement in single family residential construction, while multifamily construction may have remained weak. Total housing starts rose 8.3% m-o-m to 1215k in June, above expectations (Nomura: +2.6% to 1120k, Consensus: +6.2% to 1160k). The prior month was revised up to a 1122k annual pace, equivalent to a 2.8% m-o-m decline. The upside surprise in the June reading was attributable to a stronger-than-expected rebound in multi family housing starts, which jumped 13.3% after five consecutive months of decline. In addition, single family starts rose solidly by 6.3%, suggesting steady underlying demand. Note that m-o-m rates of housing starts data tend to be highly volatile. On a y-o-y basis, single family starts continued to increase steadily, but multifamily starts continued to slow. Despite strength in the last month of Q2, the pace of total housing starts averaged 1164k in Q2, 6.0% lower than Q2. We expect a modest improvement in housing starts in Q3, with steady growth in single family housing starts. Today’s report also indicated June construction permits jumped strongly by 7.4%, above expectations (Nomura: +1.0% to 1180k, Consensus: +2.8% to 1201k), pointing to more construction starts over the coming months. However, with a slowing trend in multi family housing starts, the pace of improvement in aggregate housing starts may not be so robust. 

GDP tracking update: 

Today’s data left our Q2 GDP tracking estimate unchanged at 2.5% q-o-q saar. June housing starts were stronger than expected and May data were revised upwards slightly, suggesting less drag from residential construction in Q2. However, after rounding, our Q2 real GDP growth tracking estimate is unchanged at 2.5%."