Canadian permit approvals jumped 8.8% in August, beating forecasts

• Permits climbed 8.8% month over month, against expectations of +2.0%; the previous reading was revised to a 15.8% drop from 17.3%.
• The value of all permits came to $13.6 billion, a rise of $1.1 billion.
• Residential permits totaled $8.5 billion, also up $1.1 billion.
• Multi-unit dwellings accounted for $5.8 billion, an increase of $1.1 billion.
• Single-family permits held at $2.6 billion, little changed.
• Non-residential permits were $5.1 billion, $29.8 million lower.
• Adjusted for inflation, permit value gained 8.6% on the month and 12.4% on a year-over-year basis.
• Authorized housing units numbered 25,800, 12.8% above the prior month.

Statistics Canada reported that building permits across the country increased 8.8% in August, comfortably exceeding the 2.0% gain forecasters had looked for. The drop recorded for July was also revised to a 15.8% contraction from the initially reported 17.3%, reinforcing the upbeat tone of the latest data even though that month still showed a clear decline.

The rebound was led by residential construction intentions. Ontario, British Columbia and Alberta were the main contributors to a $1.1 billion advance in multi-unit permit values, while single-family permits stayed roughly flat. Commercial permits fell by $380.0 million, more than offsetting increases of $317.3 million in industrial permits and $32.9 million in institutional permits, pushing non-residential activity slightly down.

Even with the monthly bounce, the housing pipeline over a longer horizon stayed subdued. Over the most recent 12 months, 299,500 dwellings were authorized, compared with 305,500 in the 12 months before that.

Quick take: August delivered a clear upside surprise, and the upward revision to July reinforced it. The data bodes well for construction ahead, though the increase was narrow in scope, centering on multi-unit projects after a steep monthly slump. The report could lift the Canadian dollar and weigh on USDCAD, though permit data on its own is unlikely to shift the Bank of Canada's policy stance materially.

Building permits, as this release defines them, measure the value of construction work approved by Canadian municipalities. Because the figures are monthly and seasonally adjusted, they provide an early signal of possible construction activity, investment and employment. A permit indicates an intention to build, but it does not mean construction will start right away. Market focus is on the US CPI release, with yields sharply higher: the two-year is up 14 basis points at 4.935%, while the 10-year has climbed 9.7 basis points to 5.314%.