WASHINGTON — U.S. builders broke ground on more homes than expected in November, while wholesale inflation — led by falling energy prices — took the biggest plunge in more than two years, the government said yesterday.

While the reports signaled strong economic growth with muted price pressures, some economists cautioned that inflation could tick up in December. Energy prices have been rising in recent days. And even with the fall in wholesale inflation, prices for some crude and intermediate goods, such as steel, rose in November.

"There is inflation in the pipeline, but more crucial than that is that energy prices have gone up (since November)," says Jason Schenker, economist for Wachovia.

The Commerce Department said housing starts jumped 5.3 percent from October to a 2.123 million-unit annual pace. Building permits, an indicator of future activity, rose 2.5 percent.

Housing starts increased nationwide with the exception of the South, where rebuilding from late-summer hurricanes has yet to hit full stride.

"Until today, I've been fairly confident that there was enough evidence to suggest that the market had topped out, probably in the third quarter sometime, and that we were off on this long-expected cooling process for housing," says David Seiders, chief economist for the National Association of Home Builders.

Seiders suggested that builders were managing to keep volume high through increased use of price incentives, but he expects sales and construction to cool in 2006. He sees home purchase prices rising about 6.5 percent next year.

"My judgment still is that the market, which has been extremely strong, probably is toying around with peaks if not slightly past them," Seiders said.

In Hawai'i, developers haven't been able to keep up with demand for new homes. There were only 354 new homes on the market in the third quarter compared with 606 during the same time last year, according to local researcher Ricky Cassiday.

Separately, the Labor Department said its producer price index, which measures inflation at the wholesale level, dropped 0.7 percent in November. That's the biggest monthly decline since the spring of 2003. Energy prices fell 4 percent, with home heating oil prices down 15.5 percent and gasoline prices off 10.7 percent.

Even though energy prices, which rose sharply after hurricanes Katrina and Rita disrupted drilling and refining in the Gulf, are down from recent peaks, they are well above year-ago levels, and gasoline prices are rising again.

Core inflation, which excludes food and energy, rose a tame 0.1 percent.

"Price pressures are lurking in the production pipeline," says Sherry Cooper, economist for BMO Nesbitt Burns. "The U.S. economy is not yet out of the inflation woods."