Housing starts far outstripped economists' expectations in May, growing by 17.2 percent over April, according to figures released by the U.S. Commerce Department, sending stocks higher on Tuesday.
Economists said that the home construction figures offer some encouragement, but warned that housing inventories are still too high. The National Association of Home Builders had reported lower builder confidence in its June report, after gains in recent months.
The new housing figures may show greater willingness of builders to build but should not signal any strong movement in the home construction industry, said Robert Curran, lead home building analyst with Fitch Ratings, according to Dow Jones Newswires.
Further declines in home sales could give more pain to the construction equipment industry, which has suffered with along with farm equipment manufacturers in the recessionary environment.
A major European manufacturer of trucks and construction equipment reported Monday that its deliveries of trucks had inched up 3 percent in May from April, but deliveries were still more than 57 percent lower than last year.