The U.S. economy is expanding at a 4.4 percent annualized rate in the third quarter, the Atlanta Federal Reserve’s GDPNow forecast model showed Wednesday after homebuilding increased more than expected in August.
The boost in housing starts was seen as a positive sign for the housing market which has underperformed the broader economy amid rising interest rates for home loans.
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2018 is unchanged from September 14, the Atlanta Fed said.
After Wednesday morning’s new residential construction release from the Census Bureau, the nowcast of third-quarter real residential investment growth inched up from -0.7 percent to -0.2 percent.
The next GDPNow update is Thursday, September 27.
Housing starts rose 9.2 percent to a seasonally adjusted annual rate of 1.282 million units in August, the Commerce Department said. Analysts polled by Reuters has expected an annual rate of 1.235 million units.
The Commerce Department raised its estimate for starts in July to a 1.174 million-unit rate.
U.S. housing starts data can be volatile and subject to large revisions. Much of August’s gain was in the particularly volatile multi-family component, with starts on buildings with two or more units rising 29.3 percent to an annual rate of 406,000 units.
Single-family homebuilding, which accounts for the largest share of the housing market, rose a more modest 1.9 percent to a rate of 876,000 units in August.
Groundbreaking activity increased in the Midwest, South and West, but was flat in the Northeast.
Building permits, however, fell 5.7 percent to a rate of 1.229 million units.
The U.S. housing market has underperformed a robust economy, with economists blaming the slowdown on low inventories and rising mortgage rates, which have combined with higher house prices to make home purchasing unaffordable for some first-time buyers.
Material from Reuters was used in this report.
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