By Xavier Fontdegloria

Construction of new homes in the U.S. increased in May, partly reversing April's fall, amid scarcity of building materials and labor shortages that have weighed on construction activity, data from the Commerce Department showed Wednesday. Here are the main takeaways from the report:

--Housing starts, a measure of U.S. homebuilding, rose 3.6% in May compared with April, to a seasonally adjusted annual rate of 1.572 million. The reading is below the consensus forecast from The Wall Street Journal poll of economists, who expected starts to rise 3.9% to an annual pace of 1.63 million.

--The current level of starts is 50.3% above compared with the same month a year earlier due to low-base effects in May 2020.

--In April, housing starts stood at a revised 1.517 million from an earlier estimate of 1.569 million.

--Monthly housing starts data are volatile and are often revised. May data came with a margin of error of 10.3 percentage points.

--Residential permits, which can be a bellwether for future home construction, decreased 3% in May compared with April, to a seasonally adjusted annual rate of 1.681 million. The figure misses economists' forecasts of a 1.7% decline to an annual pace of 1.73 million.

--U.S. housing starts report for May compares with June's indicator compiled by the National Association of Home Builders, which showed confidence in the single-family housing market decreasing slightly.

--Home builders are trying to ramp up construction amid strong buyer demand and scarce supply of homes for sale, but shortages of labor and increasing prices for building materials pose some downside risks for the months ahead, economists say.

Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com

(END) Dow Jones Newswires

06-16-21 0902ET