U.S. housing starts slid in April but permits to build new homes beat expectations as builders anticipated steady demand fueled by low mortgage interest rates, a government report showed on Tuesday.

The Commerce Department said homebuilders broke ground at a seasonally adjusted annual rate of 1.969 million units last month, down 2.1 percent from an upwardly revised 2.011 million in March. Analysts had expected starts to edge down to a 1.99 million unit pace.

"They are a little lower than expected but they are still at pretty stratospheric levels," said Rick Egelton, deputy chief economist at the Bank of Montreal in Toronto.

There was little market reaction to the data.

Permits, a sign of builder confidence, climbed to 1.999 million units in April, a 1.2 percent increase from an upwardly revised 1.975 unit pace the month before. Analysts were expecting permits to remain steady at about 1.95 million.

"A recent rush to buy homes, telegraphed by yesterday's solid reading on the homebuilders survey and recent strong mortgage applications, suggests starts will stay robust near term, partly as buyers rush to avoid yet higher mortgage rates ahead," UBS AG said in an economic report.

The National Association of Home Builders said its housing index, a gauge of builder sentiment on sales and buyer traffic, was at 69 for May, unchanged from April. An index reading above 50 means more builders see sales conditions as good than poor.

Mortgage rates dipped to near 40-year lows at the start of 2004 but have risen in recent weeks as the U.S. economic rebound has solidified, fueling expectations for a near-term interest-rate increase from the Federal Reserve.

MIXED NEWS FROM WORLD OF SHOPPING

There was mixed news from the world of retailing.

Chain-store sales fell 0.8 percent last week, after a 0.3 percent rise the previous week, the International Council of Shopping Centers and UBS said in a report. Sales were up 6.2 percent over the prior-year period.

"Though we saw a slight decrease in sales this past week, consumers did continue to shop for summer-related merchandise, especially fans, air conditioners and summer apparel," Michael Niemira, ICSC's chief economist and director of research, said in a statement.

A separate report from Redbook Research showed sales at U.S. chain stores stayed brisk in the latest week, helped by comparisons to a weak prior-year period and strong demand for warm-weather items.

Redbook said sales last week at major U.S. retailers rose by 4.8 percent on a year-over-year basis. Sales so far in May were up 0.7 percent compared with April.

Department stores reported increased customer traffic and customers buying more items at full price, the report said.

Still, retailers expressed worry about gasoline prices.

The U.S. average price for retail gasoline burst above the $2 a gallon threshold for the first time, jumping 7.6 cents over the last week to a record high $2.017 a gallon, the government said on Monday.

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