New-home construction in the Untied States rose by more than expected in November, showing strength despite rising mortgage rates and higher prices for building materials. Meanwhile inflation pressures at the wholesale level receded.

The U.S. Commerce Department today said that housing starts increased 5.3% to a seasonally adjusted 2.123 million annual rate last month. October starts, originally reported at 2.014 million, declined 6.6% to 2.017 million from September’s 2.160 million rate. Permits for future building rose 2.5% to a 2.155 million annual rate, partially reversing the 5.2% slump posted in October.

The gains in new residential construction came despite rising borrowing costs and signs of wariness about future prospects among homebuilders.

In a separate report, the U.S. Labor Department said its producer-price index for finished goods fell 0.7% on a seasonally adjusted basis last month, retracing an unrevised 0.7% increase in October.

The drop was led by a sizable 4% fall in energy prices, which came after four months of gains related to higher crude-oil prices after Hurricanes Katrina and Rita caused widespread shutdowns of wells and refineries along the Gulf Coast.

However, stripping away food and energy costs, the “core” PPI increased 0.1% in November following an unrevised 0.3% decline in October. That mirrored last week’s report on the U.S. consumer-price index, which showed that overall consumer prices fell 0.6% but “core” costs rose 0.2%.

Gasoline prices last month fell 10.7%, the sharpest drop since May 2003. Residential natural gas prices fell 0.5%, the biggest drop since June, while home heating-oil prices fell 15.5%, the sharpest decline since April 2003.