New residential construction in the U.S. spiked by more than expected in the month of October, according to a report released by the Commerce Department on Wednesday.

The report said housing starts surged up by 4.9 percent to an annual rate of 1.530 million in October after soaring by 6.3 percent to an upwardly revised rate of 1.459 million in September.

Economists had expected housing starts to jump by 3.2 percent to a rate of 1.460 million from the 1.415 million originally reported for the previous month.

With the bigger than expected increase, housing starts reached their highest annual rate since coming in at 1.567 million in February.

“The housing sector continued to defy gravity in October, with housing starts surpassing expectations and climbing to their strongest pace since February,” said Nancy Vanden Houten, Lead U.S. Economist at Oxford Economics.

She added, “Strong demand, low inventory, and record levels of homebuilder confidence continue to support new home construction.”

The spike in housing starts came as single-family starts skyrocketed by 6.4 percent to a rate of 1.179 million, while the rate for units in buildings with five units or more tumbled by 3.2 percent to 334,000.

Meanwhile, the Commerce Department said building permits came in at an annual rate of 1.545 million in October, virtually unchanged from the revised rate seen in September.

Building permits, an indicator of future housing demand, had been expected to rise by 0.5 percent to a rate of 1.560 million from the 1.553 million originally reported for the previous month.

The report showed a 0.6 percent uptick in single-family permits to a rate of 1.120 million was offset by a 1.6 percent drop in multi-family permits to a rate of 425,000.

Compared to the same month a year ago, housing starts in October were up by 14.2 percent, while building permits were up by 2.8 percent.

“We expect some moderation in the pace of housing starts in the face of the rapidly escalating health crisis, a faltering recovery, and softening labor market gains,” Vanden Houten said. “However, the risk in the near term may be for further upside surprises.”

On Tuesday, the National Association of Home Builders released a separate report showing homebuilder confidence unexpectedly jumped to another new record high in the month of November.

The report said the NAHB/Wells Fargo Housing Market Index climbed to 90 in November from 85 in October. Economists had expected the index to come in unchanged.

The material has been provided by InstaForex Company –

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