Housing starts are a leading economic indicator because they reflect the level of new construction activity in the housing sector, which has a significant impact on various other sectors of the economy. The housing market is a major component of the overall economy, and trends in this market can have significant implications for the health of the broader economy.

An increase in housing starts suggests that builders and developers are optimistic about future demand for housing, which in turn leads to increased employment and consumer spending in related industries such as construction, building materials, and home furnishings. Furthermore, the construction of new homes can also lead to an increase in demand for goods and services such as utilities, landscaping, and home improvement.

Housing starts can also serve as a leading indicator for changes in interest rates and mortgage rates. An increase in housing starts may indicate that the demand for credit is increasing, which can lead to higher interest rates in the future.

Overall, housing starts provide valuable insights into the overall health of the economy and can help economists and policymakers make informed decisions regarding monetary and fiscal policies.