U.S. housing starts jumped to their highest level in nearly 7-1/2 years in April and building permits soared, hopeful signs for an economy that is struggling to regain strong momentum after a dismal first quarter.

    The strength in housing is in stark contrast with weakness in consumption, business spending and manufacturing, which has prompted economists to lower their second-quarter growth estimates and raised doubts that the Federal Reserve will raise interest rates before the end of 2015.

    “The stronger starts and permits data suggests that some real gauges of economic activity may finally be starting to accelerate during the spring, increasing optimism that the Fed may be on track to hike rates later this year,” said Gennadiy Goldberg, an economist at TD Securities in New York.

    Groundbreaking surged 20.2 percent to a seasonally adjusted annual pace of 1.14 million units, the highest since November 2007, the Commerce Department said Tuesday. The percent increase was the biggest since February 1991.

    Adding to the report’s strong tenor, March’s starts were sharply revised higher. Groundbreaking for single-family homes, which accounts for the largest share of the market, hit its highest level since January 2008.

    While April’s sharp acceleration in starts likely reflected pent-up demand during a harsh winter, a 10.1 percent jump in permits for future home construction to a near seven-year high 1.14 million-unit rate indicated the rebound was sustainable.

    Home building is being boosted by solid gains in household formation as more young adults find employment and very tight housing inventories. Economists had forecast groundbreaking increasing to only a 1.02 million unit pace and permits rising to just a 1.06 million unit rate last month.

    The signs of strength in housing fit in with views a rebound is under way. There is cautious optimism that housing, which has seen an acceleration in home sales and prices, will combine with a tightening labor market to lift the economy out of the soft patch hit at the start of the year.

    “The strong rebound in housing starts confirmed expectations for housing to accelerate substantially in the second quarter and be a stand-out growth contributor amid otherwise sluggish indications for a pickup in GDP growth,” said Ted Wieseman, an economist at Morgan Stanley in New York. (SD-Agencies)