WASHINGTON (Reuters) - Construction spending rose to its highest level in nearly four years in May as a sharp rebound in public outlays offset a decline in investment in private nonresidential projects, pointing to moderate economic growth.
Construction spending increased 0.5 percent to an annual rate of $874.9 billion, the Commerce Department said on Monday. That followed a revised 0.1 percent gain in April.
Economists polled by Reuters had expected construction spending to rise 0.6 percent in May after a previously reported 0.4 percent increase the prior month.
The construction sector is regaining some strength after collapsing during the recession, but the recovery remains slow as the commercial real estate market and factory construction is yet to pick up. The housing market is leading much of the recovery in construction.
In the first quarter, growth in spending on nonresidential structures contracted for the first time in two years.
Construction spending in May was lifted by a 1.8 percent rise in public construction projects, the biggest rise in nearly a year, after two straight months of declines. Public construction spending in May touched its highest level since November last year.
Outlays on federal government projects rose 0.6 percent, advancing for a second straight month. State and local spending, which is far larger than federal projects, jumped 1.9 percent to a six-month high.
Spending on private construction projects was flat. Residential construction spending increased 1.2 percent to its highest level since October 2008. Spending had dipped 0.1 percent in April, and part of the increase in May was due to renovations, which do not go into the calculation of GDP.
Spending on private nonresidential structures fell 1.4 percent in May after three straight months of gains.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)