WASHINGTON, D.C.: U.S. home construction and manufacturing activity surged in February, but rising costs from tariffs and economic uncertainty threaten the pace of recovery, government data showed this week.

According to the Commerce Department, single-family housing starts jumped 11.4 percent to a seasonally adjusted annual rate of 1.108 million units. The increase was driven by a rebound in the Northeast and South, where milder weather helped builders resume projects. Housing starts also rose in the West but fell in the Midwest, likely due to lingering winter storms.

Despite the monthly gains, housing starts remained 2.3 percent lower than a year ago. Tariffs on raw materials, including lumber, steel, and aluminum, continue to push up construction costs. The National Association of Home Builders estimated that "a typical cost effect from recent tariff actions at US$9,200 per home," adding pressure to an already tight housing market.

"None of the economic reports today are tariff-free," said Christopher Rupkey, chief economist at FWDBONDS. "The economy is swiftly losing momentum here, and if Washington does not change course on many of its business-unfriendly proposals and initiatives, the odds of an economic recession could shift from a risk to a reality in a hurry."

In addition to the tariffs, labor shortages in construction have worsened as the Trump administration enforces stricter immigration policies. Undocumented workers, who make up about 23 percent of the construction workforce, have become increasingly scarce due to deportation fears, according to the Center for American Progress.

Meanwhile, the Federal Reserve is closely watching inflation and trade policies as it meets this week to set interest rates. The Fed is expected to maintain its benchmark overnight rate between 4.25 percent and 4.50 percent after cutting rates by 100 basis points since September.

A separate report from the Labor Department showed import prices rose 0.4 percent in February, the same as in January, despite expectations of a decline. Prices of Chinese imports in the U.S. jumped 0.5 percent, the most significant increase since March 2022, raising concerns that tariffs are being absorbed by American consumers rather than foreign exporters.

"Import prices are measured before the imposition of any tariffs, and if import prices do not fall sharply in the coming months, it will be clear evidence that the tariffs are being paid by U.S. households and companies," said Conrad DeQuadros, senior economic advisor at Brean Capital.

Factory activity also showed unexpected strength, with industrial production rising 0.9 percent in February, driven mainly by increased motor vehicle output. Economists said businesses may be accelerating production ahead of additional trade restrictions.

"The threat of tariffs and the on-again, off-again implementation style is likely more damaging for manufacturers who are trying to operate in this environment," said Shannon Grein, an economist at Wells Fargo. "Trying to navigate supply snarls and cost pressures is hard in normal times; adding the uncertainty of tariffs only exacerbates that challenge."