Housing starts in the U.S. increased more than forecast in August, a signal the industry is stabilizing.

Builders broke ground on 598,000 homes at an annual rate, up 10.5 percent and the most since April, following a 541,000 pace in July, the Commerce Department said today in Washington. Building permits, a proxy of future activity, rose from a record low.

Mortgage rates close to record lows may be giving builders some confidence to begin new projects after the expiration of a government tax credit caused sales to plunge. Even so, a housing recovery is dependent on a drop in the unemployment rate, which is currently near 10 percent.

“Housing is recovering at a very anemic pace compared with other postwar recoveries,” Hugh Johnson, chief investment officer of Hugh Johnson Advisors LLC in Albany, New York, whose starts forecast was the highest in a Bloomberg News survey, said before the report. “The inventory of unsold homes is still very, very substantial and as a result it’s going to take time before we start to see sales improve meaningfully and starts improve meaningfully.”

Canada's annual inflation is beginning to track lower again after an extraordinary spike in July that accompanied the introduction of a new harmonized sales tax in three provinces.

Statistics Canada said Tuesday that inflation edged down one-tenth of a point to 1.7 per cent in August, as prices on a monthly basis fell 0.1 percentage points from July.

Underlying core inflation, which the Bank of Canada uses to gauge price pressures in the country, was unmoved at 1.6 per cent, well below the central bank's 2-per-cent target.

The harmonized sales tax is estimated to be adding about 0.7 per cent to the annual inflation rate — even more in the affected provinces of Ontario, British Columbia and Nova Scotia — and will be exerting an influence for the next year.

Prior to July's 0.8 per cent bump, the inflation rate had fallen to 1 per cent.

The HST was not the only influence on inflation — prices were moderately higher in August across a broad spectrum, with increases registered in seven of the eight components tracked by the agency.

Overall energy prices rose 5 per cent, pushed by a 7.7-per-cent hike in electricity rates, while home purchases rose 5.5 per cent, car insurance was up 5.1 per cent, and restaurant increased 2.5 per cent.

Food prices also rose somewhat with 1.6-per-cent increase last month, following a 1.1-per-cent pick-up in July, and prices associated with health and personal care rose 3.5 per cent.

The major deflationary influences were clothing and footwear, which saw costs decline 2.2 per cent last month from a year earlier, home mortgage costs, which declined 3.8 per cent, fresh vegetables, which dipped 4.2 per cent, and air travel, which fell 2 per cent.

Regionally, the harmonized tax provinces were among the jurisdictions with the highest inflation rate, led by Ontario at 2.9 per cent. But Newfoundland was not far behind with a 2.4 per cent rate, mainly due to higher costs for electricity, meat and autos.

Manitoba had the country's lowest inflation rate among provinces at 0.3 per cent.