Housing starts boost economy

Housing starts posted the largest jump in seven years in May, government data shows.The Commerce Department report revealed May housing starts increased to an annual rate of 1.733 million from a revised 1.553 million pace in April, an 11.6 percent increase. It’s the largest month-to-month jump since the July 1995 increase of 14 percent, and it surpassed the forecast of 1.6 million starts in May by analysts surveyed at briefing.com.

Building permits, a more obvious indicator of demand for new homes, also rose 2.6 percent to an annual rate of 1.674 million from a revised 1.631 million in April. Steve East, chief economist with Friedman Billing & Ramsey, told CNNfn’s Money Morning the data displays the continued strength in housing, which he said, along with consumer spending, has kept the economy afloat while business spending has slowed.

“The housing sector continues to do what it’s been doing for over a year — provide shelter not only for people but for the economy from the storm of the recession,” East said. “Business spending is still negative, and we’re not having all cylinders firing, and it’s important that the cylinders that have been firing keep firing.”

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