The economic rebound gets another boost.

WASHINGTON (AP) – Housing construction jumped to a 17-year high in July in spite of rising interest rates. It was an unexpectedly strong showing and one more sign, analysts said, that the long-craved economic rebound may finally be happening.

The Commerce Department reported Tuesday that construction of new homes and apartments rose by 1.5 percent in July over the previous month to a seasonally adjusted annual rate of 1.87 million units.

It was the highest level for housing construction since April 1986 and was a better performance than many analysts expected, given that June had been a strong month and mortgage rates have been rising in recent weeks.

After hitting a low of 5.21 percent in mid-June, rates for 30-year mortgages have risen by a full percentage point to stand at 6.24 percent last week, according to Freddie Mac’s nationwide survey.

Some analysts saw the July jump in construction as an effort by builders to get houses on the market before mortgage rates move even higher and dampen demand.

“The push to complete homes before mortgage rates slow the market is on, and builders are going wild,” said economist Joel Naroff of Holland, Pa.

The surprisingly strong showing in housing was the latest in a string of better-than-expected economic reports in recent days, including a solid gain in orders to U.S. factories and a surge in retail sales in July.

“These numbers suggest that the economy is indeed beginning to accelerate from an extended period of sluggishness,” said Lynn Reaser, chief economist at Banc of America Capital Management.

Reaser said she was looking for economic growth in the second half of this year to measure above 4 percent at an annual rate, more than double the lackluster 1.7 percent rate of growth in the gross domestic product measured over the last nine months. President Bush is counting on stronger growth to make a dent in the unemployment rate before next year’s presidential election and blunt Democratic charges that Bush’s jobless recovery has lasted far longer than the jobless recovery the country experienced under Bush’s father.

“We have already tried to take off two times only to see the takeoff aborted,” said David Wyss, chief economist at Standard & Poor’s in New York. “There are a lot of nasty foreign problems out there that could shake confidence.”

In other economic news Tuesday, the preliminary reading of consumer confidence from the University of Michigan showed consumer sentiment softened slightly in mid-August, with the index dipping to 90.2 from 90.9 at the end of July.

Analysts were also closely watching long-term interest rates, which have been rising in recent weeks, even as the Federal Reserve has stressed that it planned to keep the short-term rate that it controls at a 45-year low for as long as it takes to generate a sustained economic recovery.

Housing purchases and consumer spending overall have been the standout performers for the economy, which has struggled for almost two years to mount a sustainable rebound from the 2001 recession, which began in March of that year and ended in November.

The July housing report showed that builders began construction on 1.52 million single-family homes at a seasonally adjusted annual rate, a 1.9 percent increase from June and the fastest pace since November 1978.

Construction on apartment units fell by 1.8 percent last month to an annual rate of 319,000 units.

By region of the country, housing starts soared 19 percent in the Northeast to an annual rate of 194,000 units. Housing construction went up 5.7 percent in the Midwest, to an annual rate of 372,000 units, and up 5.6 percent in the South to a rate of 872,000 units.

The West was the only region of the country where construction declined, a drop of 13.9 percent to an annual rate of 434,000 units.

AP-ES-08-19-03 1604EDT

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