Housing starts totaled 582k in June, much stronger than consensus (530k) expectations. There were also upward revisions to starts in April and May. In addition, the rise was focused in the less-volatile single-family sector, and was matched by a significant gain in building permits. Thus, these figures look like a genuine upward surprise, and support the view that housing construction activity is bottoming out.

In addition to the upward surprise in June, starts were revised up in April (479k from 454k) and May (562k from 532k). Single-family starts rose to 470k in June from 411k in May, the highest reading since October 2008. Single-family permits increased to 430k in June from 406k in May, also the highest reading since October. In contrast, multi-family starts fell to 112k in June from 151k in May. Single-family starts and permits climbed or held steady in all four regions in June, suggesting that a broad-based stabilization is occurring.

For Q2 09 as a whole, single-family housing starts spiked an annualized 94.2% after 12 quarters of contraction, while single-family permits rose 57.9% following 14 quarters of contraction. These are the largest quarterly increases since the early 1990s, and are similar to the spikes seen at the end of many previous recessions

US data/events: Monday: leading indicators, speaker

Monday’s only significant US release will be the index of leading indicators at 10:00am/14:00 GMT. We look for the index to continue to improve, rising 0.5% in June after jumping 1.2% in May. All of the available components should contribute positively with stock market gains, falling initial claims, and the wide spread between 10y Treasury and fed funds leading the rise. We expect the real money supply to provide a slight offset, while estimated consumer and nondefense capital goods orders should be roughly flat. However, surprisingly high building permits add upside risk to our forecast.

In terms of speakers, Atlanta Fed President Lockhart (FOMC voter) will discuss the economic outlook at 1:30pm/17:30 GMT.