WASHINGTON (AP) Housing construction posted a better-than-expected increase in January, which pushed activity to the highest level in six months.

The Commerce Department said Wednesday that construction of new homes and apartments rose 2.8 percent last month to a seasonally adjusted annual rate of 591,000 units. That was better than the 580,000 annual pace that economists had forecasted.

Applications for building permits, considered a good barometer of future activity, fell 4.9 percent to a rate of 621,000, but that was after two months of large increases.

In another sign of strength, Wednesdays report revised upward data in December to show builders were starting construction at an annual pace of 575,000 units during that month, much stronger than the 557,000 originally reported. Even with the upward revision, activity was down 0.7 percent in December from the month before, a dip that was blamed on severe weather in many parts of the country that depressed construction activity.

Economists are hoping that housing is beginning to recover and a rebound in this area will help support the economy as it struggles to mount a sustained recovery from the deepest recession since the 1930s.

Januarys results were led by a 10 percent jump in activity in the Northeast and an 8.9 percent increase in the West. Construction was up a smaller 1 percent in the South and 3.2 percent in the Midwest.

The strength in January pushed construction activity up by 21.1 percent from the pace in January 2009. Last months building rate the fastest pace since July.

Construction of single-family homes rose 1.5 percent to a seasonally adjusted annual rate of 484,000 units while construction of multi-family units increased 9.2 percent to an annual rate of 107,000 units.

In other favorable developments, mortgage rates are hovering around 5 percent, pushed down by a Federal Reserve program to buy mortgage-backed securities. And builders say they are also seeing a boost in the demand for homes coming from a government stimulus program. That program provides tax credits of up to $8,000 for first-time home buyers and up to $6,500 for current homeowners who decide to move.

In another economic report, industrial production rose 0.9 percent in January, the seventh consecutive monthly increase as manufacturers help lead the nations recovery.

The Federal Reserve reported Wednesday that Januarys numbers rose in all three major categories: manufacturing, mining and energy utilities. That is the first such show of strength since August 2009.

It says manufacturing rose 1.0 percent, while mining and utilities each gained 0.7 percent.

The results are a more meaningful sign of economic progress than Decembers number, which the Fed revised up to 0.7 percent from the 0.6 percent reported earlier.

That increase was driven by weather-related increases in utility production, while manufacturing posted a 0.1 percent loss.

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