Construction spending rises on public projects

WASHINGTON (Reuters) - U.S. construction spending rose unexpectedly in September as investment in public projects touched the highest level in more than a year, a government report showed on Monday.

The Commerce Department said construction spending increased 0.5 percent to an annual rate of $801.7 billion. August's construction outlays were revised down to show a 0.2 percent decline instead of the previously reported 0.4 percent gain.

Economists polled by Reuters forecast construction spending falling 0.5 percent in September.

The government reported on Friday that spending on structures increased in the third quarter for the first time since the second quarter of 2008, while residential building contracted sharply following the end of a home buyer tax.

Spending on public projects increased 1.3 percent in September to $319.7 billion, the highest level since July 2009, after rising 2.2 percent in August.

State and local government spending on construction projects increased 0.8 percent in September after rising 2.3 percent the prior month.

Investment in private construction was flat after dropping 1.6 percent in August. Spending on private home building increased 1.8 percent in September after falling 4.2 percent the prior month.

Private nonresidential spending declined 1.6 percent in September after rising 0.8 percent the previous month.

(Reporting by Lucia Mutikani; Editing by Theodore d'Afflisio)