Today's U.S. housing starts and permits report for January had few redeeming features as the headline level of starts fell 16.8% to a new record-low of 466,000 units. The level of starts was 12% lower than consensus forecasts. The declines were widespread across the single-family component (-12.2%) and multiples (-27.9%), and also across regions (ranging from -6.4% in the West to -42.9% in the Northeast). Weather could have been a depressing factor in the Northeast, although for the nation as a whole the month wasin terms of temperature only moderately colder than normal

Permits were also weaker than expected, but only by 0.9% (521,000 compared to the expected 525,000), with multiples permits actually up by 1.6% during the month. Both permits and starts for December showed modest revisions (up for starts, down for permits).

With yesterday's NAHB housing index suggesting no bounce in new home sales - hovering a fraction above all-time lows - little can be expected from starts in the months ahead, particularly with the most recent new home sales data showing 12.9 months of supply.

With the level of starts in January some 75% below the fourth-quarter average at an annual rate, first-quarter GDP growth rates may be revised down further. Despite this, market reaction may be limited due to fatigue with respect to bad housing news.

RBC Financial Group

The statements and statistics contained herein have been prepared by the Economics Department of RBC Financial Group based on information from sources considered to be reliable. We make no representation or warranty, express or implied, as to its accuracy or completeness. This report is for the information of investors and business persons and does not constitute an offer to sell or a solicitation to buy securities.