WASHINGTON (AP) Housing construction in August surged to its highest level in five months, a dose of encouraging news for the economy’s expansion.

The number of housing projects launched by builders clocked in at a seasonally adjusted annual rate of 2 million units, a 0.6 percent increase from July’s level, the Commerce Department reported Sept. 21.

The 2 million-unit pace of housing construction registered in August was the highest since March and was better than analysts were expecting. They were forecasting housing construction to decline last month, in part because of hurricanes and bad weather in parts of the country.

“We repeatedly underestimate the vigor and resilience of housing demand,” said Steve Stanley, chief economist at RBS Greenwich Capital. “As it turns out, neither wind nor rain nor flooding can keep the homebuilder from completing his or her appointed rounds.”

July’s housing figures also turned out to be stronger than the government first estimated; housing construction shot up by 9.4 percent to an annual rate of nearly 1.99 million units.

The latest report on housing reinforced Federal Reserve Chairman Alan Greenspan’s view that the economy has regained some traction after hitting a soft patch in the late spring.

“I think this is a very good signal that the economy is coming along nicely,” said David Seiders, chief economist of the National Association of Home Builders.

The economy is a frequent topic of presidential campaign sparring. President Bush and his Democratic rival, John Kerry, have divergent views of how the economy and jobs are faring.

Bush says making his tax cuts permanent will strengthen the economy and spur job growth. Kerry argues that the president’s tax cuts have mainly benefited the wealthy, squeezed the middle class and plunged the government’s balance sheets deeper in the red.

On the housing front, builders were slightly less bullish about sales prospects for September. But they still are feeling good about the market’s overall outlook.

“In the midst of a particularly devastating hurricane season, builder confidence is essentially unshaken,” said Bobby Rayburn, president of the National Association of Home Builders.

Some economists are predicting that home sales will reach record highs for all of 2004, helped out by relatively low mortgage rates. Last week, Freddie Mac, reported that average rate on a 30-year mortgage dropped to 5.75 percent, the lowest since the beginning of April.

In Sept. 21’s report, housing construction went up in all regions of the country in August except for the West.

Builders in the Northeast broke ground on 196,000 units, on an annualized basis, last month, a 6.5 percent increase from July’s level. In the Midwest, housing construction rose by 4.8 percent to a rate of 370,000. In the South, housing starts went up by 1 percent to a pace of 907,000. But in the West, housing construction dropped by 4.7 percent to a pace of 527,000.

The housing and residential construction markets have been good sources of strength for the economy, which grew at a 2.8 percent rate in the second quarter. Economists believed it picked up speed in the current July-to-September quarter, growing at a rate of approximately 3 percent to 4 percent.

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