June construction spending rises

WASHINGTON (Reuters) - U.S. construction spending beat expectations and rose 0.3 percent in June, with the spending rate for public buildings reaching a record high, the Commerce Department said on Monday.

Analysts polled by Reuters had forecast construction spending to fall 0.5 percent, after dropping 0.8 percent in May, which was originally reported as a decline of 0.9 percent.

Public construction gained by 1.0 percent to $321.75 billion, the highest on record. State and local construction also rose 1.0 percent to a record $295.79 billion, and federal building was up 1.9 percent.

It was the fifth month in a row that public construction, which makes up a third of total U.S. construction spending, made gains.

While private construction dropped for the second month in a row, by 0.1 percent, private residential building, which makes up a quarter of construction spending, rose 0.5 percent to $246.07 billion.

The spending rate will likely add to hopes the housing sector, which triggered the current recession, is starting to rebound.

"For construction spending, all the signs are there that we've pulled back and that we are on the verge of growing again," said Jim Awad, managing director at Zephyr Management in New York.

The Commerce Department said private residential construction fell 3.1 percent in May, much less than the 3.4 percent decline originally reported. At the same time, April's residential construction was revised to a 1.5 percent rise from last month's report that it was unchanged.

Public residential construction was up 4.6 percent from May, as well.

Compared to June 2008, total construction spending was down 10.2 percent.

(Reporting by Lisa Lambert, Additional reporting by Ryan Vlestelica in New York, Editing by Andrea Ricci)