New residential construction in the U.S. showed a significant rebound in the month of May, according to a report released by the Commerce Department on Tuesday, although housing starts still came in well below economist estimates.

The report said housing starts climbed 6.8 percent to a seasonally adjusted annual rate of 914,000 in May from the revised April estimate of 856,000. The increase in housing starts came following a 14.8 percent drop in the previous month.

However, economists had been expecting housing starts to surge up to an annual rate of 955,000 compared to the 853,000 originally reported for April.

The Commerce Department also said building permits, an indicator of future housing demand, fell 3.1 percent to an annual rate of 974,000 in May from the revised April rate of 1.005 million. The drop in permits came roughly in line with expectations.