GLOBAL: "*ECB’S ZIGMAN WARNS GROWTH IS AT RISK IF INFLATION ISN’T [...]

Canadian housing activity data remained mixed going into the second half of the year, with construction and sales relatively flat. The Bank of Canada's projections from the July Monetary Policy Report eye a 0.2pp subtraction to 2026 GDP growth from housing  (a downgrade from -0.1pp in  the April report) before picking up to positive contribution in 2027-28, so little contribution is expected from this sector but it still remains to be seen whether activity has fully bottomed out.

• Housing starts unexpectedly fell in July, to a seasonally-adjusted annualized rate of 229.1k (250.0k expected, 240.8k prior). A third consecutive drop leaves year-to-date cumulative starts down 4% and at the lowest level since March 2025.
• The recent pullback has been driven by multi-unit housing down 21% Y/Y, with single units down just 8%. However, single unit starts are around multi-decade lows, whereas multi-units remain trending above pre-pandemic levels. On a more granular basis: Montreal  saw a 3% Y/Y increase in starts, but Toronto saw a 10% decline and Vancouver a 42% collapse.
• Overall as Canada Mortgage and Housing Corporation (CMHC) reminds, the 6-month moving average in starts was "virtually flat" at -0.5% in July (247.4k). So not particularly negative, but not a major impulse for overall growth either.
• In data released earlier in the day, the Canadian Real Estate Association reported a 4th consecutive month of sales increases in July (+0.5%) but remained down 5.3% Y/Y.
• From an inventory perspective,  the national sales-to-new listings ratio tightened of 51.3% is "generally consistent with balanced housing market conditions" per the CREA; overall, inventories (4.7 months of sales) are looser than they were during the red-hot 2021-22 housing market but a little tighter than seen pre-pandemic. Y/Y prices per the composite index were down 3.3% but the drop in prices has slowed.
• As the BOC noted in the July MPR,  one risk to GDP is "The overhang of unsold condominiums in Vancouver and Toronto, along with affordability issues, could mean that the recovery in housing activity is slower than expected."

• EUR/USD: Aug20 $1.1500(E3.3bln), $1.1550(E1.7bln); Aug21 $1.1500(E7.3bln), $1.1550-55(E1.8bln), $1.1595-00(E1.5bln); Aug24 $1.1450(E2.2bln), $1.1500(E1.1bln)
• USD/JPY: Aug20 Y158.00-10($1.1bln), Y160.00($1.6bln), Y162.40-50($1.3bln)
• EUR/JPY: Aug21 Y181.95(E1.1bln)
• NZD/USD: Aug20 $0.5740(N$1.3bln)
• USD/CAD: Aug21 C$1.4100-15($1.2bln)

German SME ('Mittelstand') revenue fell 2.0% Y/Y in July according to Datev data published by FAZ today (2.7% prior), supporting the narrative that a wider uptick in German economic conditions is not imminent following the marginally higher Q2 GDP.

• "After a positive trend until March, the upward movement has since reversed and turned negative [...] The economic situation remains challenging for many companies", Datev comments on longer-term trends.
• Across sectors: "While key sectors like construction and manufacturing experienced a sharp decline in revenue in July, sales in the hospitality industry were 5.9 percent higher than a year ago [...] The better performance in the hospitality sector could be due to the fact that, given the wars in the Middle East, more people are vacationing in Germany this year rather than abroad."
• More widely, German data has been mixed recently, with Q2 GDP surprising marginally to the upside at 0.2% Q/Q in the flash release but a broad-based uptick in momentum is not apparent at the current juncture, a narrative supported by the Datev SME data. Following a slightly stronger ZEW index today, key German sentiment data is scheduled for this Friday (flash PMIs) and Monday (IFO). Q2 GDP details are also scheduled for Monday.