Housing starts declined by 1.1% m/m to 698,000 in February from an upwardly revised 706,000 in January (previously 699,000), broadly in line with the consensus (700,000). The details were somewhat weaker than the headline number as the entire decline was reflected in the core single-family component, which fell 9.9% to 457,000, the lowest level since October 2011 and the first m/m decline since September.

The drop was concentrated in the South (-17.4%) and West (-16.7%), with solid gains registered in the Northeast (11.4%) and Midwest (13.9%). The decline in single-family starts was largely offset by a strong increase in the multi-family component (up 21.1% to 241,000).

While the details in February were significantly softer than we expected, the recent upward trend remains in place - for example, the level of starts is well above the Q4 average of 670,000, consistent with my view that residential investment will add to GDP growth in Q1. The outlook for housing activity has brightened in recent months - homebuilder sentiment has improved, inventory levels are low, and building permits have risen. In February they were up 5.1, with gains in both single- and multi-family components, the former up 4.9%, the fifth consecutive increase and the largest rise since December 2010.