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A for sale sign on Euclid Avenue in Toronto.

1--Sarah Dea/The Globe and Mail

Canadian housing starts unexpectedly climbed 4.3 per cent in July, data showed Tuesday, setting the third quarter off to a strong start in new home construction and maintaining its role as a key support to the economy.

Starts, elevated by a big jump in multi-residential construction, rose to a seasonally adjusted annualized rate of 205,100 units, Canada Mortgage and Housing Corp (CMHC) said.

That is up from a downwardly revised 196,600 units in June, which were originally reported at 197,400 units.

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The number of starts in July was above the average forecast of analysts who had called for 196,000 starts.

"Detracting slightly from the headline's positive cast, this month's gain was concentrated in the multiples segment, which tends to have a lower valued added," said Peter Buchanan, senior economist at CIBC World Markets.

"Today's report and the recent resilience of both permits and sales suggest housing continues to be one of the economy's strongest sectors, although sentiment among purchasers obviously remains vulnerable to recent market turmoil."

The housing sector has long been a source of support for the Canadian economy, helping draw it out of the recession, while other global economies have suffered at the hands of a weak housing market, particularly in the United States.

But the overall pace of housing activity, from starts to resales, are forecast to slow in the coming months as higher interest rates and tighter mortgage regulations dampen demand.

The seasonally adjusted annual rate of urban starts was led by a 13-per-cent jump in multiple urban starts, such as condos, to 120,200 units. CMHC said Ontario, British Columbia and the Atlantic region showed the most strength in the multi-residential sector.

But the closely watched measure of single starts decreased 7.8 per cent in July to 65,000 units.

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Rural starts were estimated at a seasonally adjusted annual rate of 19,900 units in July.

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