The United States was on track to expand 0.7 percent in the second quarter after data showed domestic housing starts surged to their strongest level in about 7-1/2 years in April, Atlanta Fed's GDPnow forecast model showed on Tuesday.

The April jump in housing starts offset a drop in industrial output which was a drag on the gross domestic product in the second quarter.

The regional Fed said on its website its estimate on second-quarter real business fixed investment growth fell to -2.3 percent from -0.6 percent following last Friday's industrial production report that showed an unexpectedly 0.3 percent fall in April.

The Atlanta Fed's GDPnow indicated second-quarter real residential investment growth increased to 3.6 percent from 1.3 percent following the April housing starts figures.