Housing starts in America unexpectedly rose to a 21-year high in January, paced by record construction of single-family homes, a government report showed. Industrial production was unchanged as warm weather damped demand for energy.

The 4.7% rise in construction to 2.159 million housing units at an annual rate followed a revised 14% surge in December that was higher than first reported, the Commerce Department said. The median forecast of 66 economists surveyed by Bloomberg News called for a decline to 1.925 million.

Payroll growth and mortgage rates averaging less than 6% are fueling demand after the best year for home sales ever in 2004. Federal Reserve Chairman Alan Greenspan in his testimony on the state of the economy to Congress today noted the housing market’s strength and suggested the central bank may keep increasing interest rates to stem inflation.

“There’s no reason to believe housing cannot have another record year,” said the chief economist at Argus Research Corp., Richard Yamarone, whose forecast of 2.05 million was the highest in the survey. “This report is proof positive that the economy can produce stellar growth with mediocre job creation.”

Employers are expected to add an average of 174,000 workers a month this year, down from a forecast three months ago of 181,000, according to a survey by the Fed Bank of Philadelphia released two days ago. The economy created 181,000 jobs a month in 2004.

Production at American factories, mines, and utilities was unchanged last month, held back by a decline in energy demand, the Fed reported today in Washington. Economists had expected a 0.3% increase. The share of industrial capacity in use slipped to 79% from 79.1%.

American automakers Ford Motor Co. and General Motors Corp. have said they’re cutting back on production in the first quarter to reduce inventories, as sales in January fell.

Building permits, an indicator of future construction, also rose last month, advancing 1.7% to an annual rate of 2.105 million, the highest since May. January was the seventh month in which permits exceeded 2 million.

Starts of single-family homes rose 2.7% to 1.76 million, the highest ever, from 1.71 million a month earlier. Starts of townhouses, apartments, and other multifamily dwellings rose 14% to 399,000 units at an annual rate. The combined pace for single- and multifamily starts was the fastest since 2.26 million in February 1984.

Housing starts have exceeded market expectations in seven out of the last 11 months, according to Bloomberg data.

“People have been saying the sky is falling for many years now, and housing continues to be solid and steady,” said Ara Hovnanian, chief executive of Hovnanian Enterprises Inc., the largest homebuilder in New Jersey. “I don’t think we’re going to exceed 2004, nor do I see a big falloff this year.”

Treasury notes fell after Greenspan said the economy has “steadied,” suggesting the Fed isn’t ready to slow the pace of rate increases. The benchmark 4% note due in February 2015 decreased almost 1/2 as of noon in New York. The yield increased 6 basis points to 4.16%.

“The rapid rise in home prices over the past several years has provided households with considerable capital gains,” the Fed chairman said in testimony prepared for the Senate Banking Committee. “Moreover, a significant increase in the rate of single-family home turnover has meant that many consumers have been able to realize gains from the sale of their homes.”

New construction rose in two regions, the South and West, last month. In the South, starts soared 19% to 1.139 million at an annual rate. They rose 1.9% in the West to 540,000. Starts fell 24% in the Northeast to 150,000 and dropped 12.5% in the Midwest to 330,000.