US: Weak housing starts data – Nomura

US housing starts fell 4.8% m-o-m in July to an annual pace of 1155k, below expectations (Nomura: -3.0% to 1178k, Consensus: +0.4% to 1220k) while June housing starts were lowered to 1213k (previously reported as 1215k), notes the analysis team at Nomura.

Key Quotes

“We think the underlying pace of single-family housing starts remains intact, while multifamily housing starts continued to slow. Housing construction permits were also weaker than expected in July, falling 4.1% m-om to an annual pace of 1223k (Nomura and Consensus: -2.0% to 1250k). The decline in permits was led by an 11.2% m-o-m drop in multifamily housing permits, reverting from the 19.3% increase in June. Single-family housing permits were unchanged. The sharp pullback in multifamily housing permits suggests that the multifamily sector may continue to weigh down overall housing starts in the near term.”

“GDP tracking update: Today’s single-family housing starts and permits data were slightly stronger than we had expected, suggesting that residential investment in Q3 may be greater than we have previously anticipated. While multifamily housing starts came in weaker than expected, considering the difference in construction expenditure per unit between single-family and multifamily homes, and a weak relationship between multifamily starts and actual construction spending which is estimated on an accrual basis, we think that the positive impact from strong single-family starts outweighs the decline in multifamily starts. Thus, we raised our Q3 GDP tracking estimate by 0.1pp to 3.0% q-o-q saar.”