New residential construction in the United States fell significantly more than expected in July, although a sharp increase in building permits offered a more encouraging signal for future housing activity, according to figures released Tuesday by the Commerce Department.
Housing starts plunged 12.4% to a seasonally adjusted annual rate of 1.239 million units in July. That followed a revised 19.7% surge in June, when starts reached an annualised rate of 1.415 million.
The July reading was considerably weaker than economists had anticipated. Housing starts had been forecast to decline 5.4% to an annual rate of 1.350 million, based on June’s initially reported level of 1.427 million.
Building Permits Jump 5% and Beat Forecasts
While actual construction activity weakened sharply, building permits delivered a much stronger result.
Permits increased 5.0% in July to a seasonally adjusted annual rate of 1.443 million, reversing much of the weakness seen during the previous month.
June permits were revised to an annual rate of 1.374 million, representing a 2.6% decline. The figure had initially been reported at 1.367 million.
Economists had expected permits to rise just 0.2% to an annualised rate of 1.370 million.
As building permits are widely regarded as an indicator of future residential construction activity, July’s unexpectedly strong increase provides a more positive signal for the U.S. housing market despite the substantial monthly decline in housing starts.