New residential construction in the U.S. unexpectedly showed a steep drop in the month of May, according to a report released by the Commerce Department on Friday.
The report said housing starts slumped by 5.5 percent to an annual rate of 1.092 million in May from the revised April estimate of 1.156 million.
The significant decline surprised economists, who had expected housing starts to climb to a rate of 1.215 million from the 1.172 million originally reported for the previous month.
With the unexpected decrease, housing starts fell to their lowest level since hitting a rate of 1.062 million last September.
Single-family housing starts dropped by 3.9 percent to a rate of 794,000, while multi-family starts plunged by 9.7 percent to a rate of 298,000.
The Commerce Department said building permits also tumbled by 4.9 percent to a rate of 1.168 million in May from a revised 1.228 million in April.
Building permits, an indicator of future housing demand, had been expected to rise to a rate of 1.250 million from the 1.229 million that had been reported for the previous month.
The sharp decline pulled building permits down to their lowest level since hitting 1.163 million in April of last year.
The report said single-family building permits fell by 1.9 percent to a rate of 779,000, while multi-family permits plummeted by 10.4 percent to a rate of 389,000.
On Thursday, the National Association of Home Builders released a separate report showing homebuilder confidence unexpectedly decreased in the month of June.
The report said the NAHB /Wells Fargo Housing Market Index dropped to 67 in June from 69 in May. The decrease surprised economists, who had expected the index to inch up to 70.
by RTT Staff Writer
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