U.S. homebuilding jumped in February as unseasonably warm weather boosted the construction of single-family houses to near a 9-1/2-year high, suggesting the economy remained on solid ground despite an apparent slowdown in the first quarter.
The economy's fundamentals were further strengthened by other data on Thursday showing a drop in the number of Americans filing for unemployment benefits last week amid a tightening labor market. Though factory activity in the mid-Atlantic region cooled this month, manufacturers reported growth in new orders and difficulties finding qualified workers.
The data came a day after the Federal Reserve raised interest rates for the third time since the 2008 financial crisis. Fed Chair Janet Yellen told reporters that the U.S. central bank was sending a message that "we have confidence in the robustness of the economy and its resilience to shocks."
"The reports painted a mostly upbeat picture of the economy," said Daniel Silver, an economist at JPMorgan in New York.
Housing starts increased 3.0 percent to a seasonally adjusted annualized rate of 1.29 million units last month, the Commerce Department said. Homebuilding was up 6.2 percent compared to February 2016, suggesting housing would contribute to growth this year.
Single-family homebuilding, which accounts for the largest share of the residential housing market, surged 6.5 percent to a 872,000-unit pace, the highest level since October 2007.
Single-family starts in the Midwest soared 20 percent to their highest level since October 2007. Groundbreaking activity jumped more than 16 percent in the West and Northeast, but fell 2.6 percent in the South.
"Single-family homebuilding usually goes dormant throughout much of these regions during the winter months, but has held up better this year due to, up until recently, much milder winter weather," said Mark Vitner, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.
Starts for the volatile multi-family housing segment fell 3.7 percent to a 416,000-unit pace. A robust labor market is supporting the housing market, helping it to buck weakness in other parts of the economy.
Further gains in single-family construction are likely as building permits increased 3.1 percent last month. A survey on Wednesday showed homebuilders' confidence jumped in March to its highest level since June 2005.
U.S. financial markets were little moved by the data as investors digested the Fed's decision on Wednesday to raise its overnight benchmark interest rate by 25 basis points to a range of 0.75 percent to 1.00 percent. The U.S. central bank also forecast two more rate hikes this year.
