New residential construction in the U.S. unexpectedly showed a notable decrease in the month of January, the Commerce Department revealed in a report released on Wednesday.
The report said housing starts tumbled 3.8 percent to an annual rate of 1.099 million in January from the revised December estimate of 1.143 million.
The steep drop came as a surprise to economists, who had expected housing starts to climb to an annual rate of 1.175 million from the 1.149 million originally reported for the previous month.
The unexpected decrease was partly due to a notable decline in single-family housing starts, which slumped 3.9 percent to a rate of 731,000. Multi-family starts also slid 3.7 percent to a rate of 368,000.
The report also showed weakness in the Midwest, where housing starts tumbled by 12.8 percent. Housing starts in the Northeast and South also fell by 3.7 percent and 2.9 percent, while starts in the West edged down by 0.4 percent.
Rob Carnell, Chief International Economist at ING Commercial Banking, said, "U.S. housing starts were soft in January - though this is a month of very low housing construction activity typically, and the seasonals can distort very small underlying changes."
"Bad snowfalls in January may account for much of the decline, and we wouldn't get too carried away with what appears to be a slight softening in the trend for this sector until we get another month's data," he added. "Still, it is another warning light for U.S. activity, so not to be ignored."
The Commerce Department also said building permits, an indicator of future housing demand, edged down 0.2 percent to an annual rate of 1.202 million in January from 1.204 million in December.
Single-family building permits dropped by 1.6 percent to a rate of 720,000, while multi-family permits jumped by 2.1 percent to a rate of 482,000.
Despite the monthly decreases, housing starts were up by 1.8 percent compared to the same month a year ago, and building permits surged up by 13.5 percent year-over-year.
The National Association of Home Builders released a separate report on Tuesday showing an unexpected deterioration in homebuilder confidence in the month of February.
The report said the NAHB/Wells Fargo Housing Market Index dropped to 58 in February from an upwardly revised 61 in January.
The decrease came as a surprise to economists, who had expected the housing market index to inch up to 61 from the 60 originally reported for the previous month.
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