Housing starts increased more than expected in July — as a result of a downward revision to the prior month — as building permits dropped, suggesting future construction could be lackluster.

US housing starts increased by 1.7 percent from June, to a seasonally adjusted annual rate of 546,000, the Commerce Department said, while single-family housing starts were off 4.2 percent to an annual rate of 432,000.

Starts in June were revised down by 8.7 percent to an annual rate of 537,000. Meanwhile, July producer prices rose 0.2 percent month-over-over as the price of raw materials increased, easing concerns that the economy was moving towards deflation.