US July housing starts fall much more quickly than anticipated

According to the Department of Commerce, in seasonally adjusted terms, the annualised rate of housing starts in July fell at a month-on-month pace of 9.6% to reach 1.446m (consensus: 1.54m).

Starts shot higher by 65.5% in the Northeast, but fell in the remaining regions, mainly in the Midwest where they dropped by 33.8% and in the South where they decreased by 18.7%.

Offsetting part of the shortfall in July starts, the estimate for the prior month was revised higher, from 1.559m to 1.599m.

Furthermore, building permits, which lead starts, declined by 1.3% versus June to reach 1.674m (consensus: 1.65m).

Ian Shepherdson, chief economist at Pantheon Macroeconomics, labelled the starts data "horrible".

It was the fifth consecutive monthly drop, the largest of the sequence, and the annualised rate of starts had fallen below 1.0m for the first time since June 2020, he explained.

Over the three months to July, the three-month rate of change for starts was off by half in annualised terms, the worst streak - Covid aside - since 2010, he added.

"We think housing construction will fall across the whole of the second half, hitting bottom in early 2023."