Housing starts expected to build on recovery date

Housing starts have risen 80% from their cyclical lows.

If record job gains from April weren't enough to convince you the Canadian economy is on solid ground, a few more measures are coming down the pipe this week that could support the case.

"In Canada, we're in the home stretch of reports on what was evidently a very strong first quarter, and the early news on Q2," CIBC World Markets chief economist Avery Shenfeld said in a research note Friday, which followed Statistics Canada's report that 108,700 additional people found work last month -- about four times what was expected.

Today, Canada Mortgage and Housing Corp. reports its April housing-start figures. Economists anticipate an annualized rate of 205,000, up from a revised figure of 200,900 in March.

"To date, housing starts have risen a massive 80 per cent from their cyclical lows, retracing over half of the peak-to-trough drop," Millan Mulraine, senior strategist with TD Securities, said in a report.

Mulraine, who's forecasting a start level of 210,000 for April, attributes some of the current strength to homebuyers looking to avoid the new harmonized sales taxes taking effect in B.C. and Ontario in July.

Another big report comes Wednesday in the form of merchandise trade data for March. Economists anticipate a Canadian surplus -- the amount exported minus what's imported -- of $1.6 billion, up from $1.4 billion in February. If right, it would mark the fourth straight surplus.

CIBC World Markets economist Krishen Rangasamy credited improved economic conditions globally as probably helping Canada maintain its trading-surplus streak in March, including greater demand for vehicles in the U.S.

"The merchandise trade report for March will likely add to earlier data that presages [Canadian economic] growth of around 5.7 per cent [annualized] for the first quarter," Rangasamy said. "But the party won't last forever for exporters, given the lagged effects of a strong Canadian dollar and the expected slowdown in the U.S. economy later in the year."

(prepared by Derek Abma/Finanial Post/National Post)