U.S. construction spending rises in May

A surge in home building pushed U.S. construction spending up by the largest amount in five months, the latest indication that the housing sector is slowly recovering.

Construction spending rose 0.9 percent in May from April, the Commerce Department reported Monday. It was the second straight monthly increase and the biggest percentage gain since December.

The May increase pushed spending to a seasonally adjusted annual rate of $830 billion. That is 11.3 percent above a 12-year low hit in February 2011. Still, the level of spending is roughly half of what economists consider to be healthy.

The construction industry is flashing signs of improvement while other parts of the economy have slumped.

Spending on both residential and nonresidential projects rose in May. Those increases show that private builders are starting to have more faith in the housing market and commercial real estate.

But spending on public projects fell to the lowest level since November 2006. That decline largely reflects tighter government budgets at the state and local level and fading federal stimulus dollars.

Steven Wood, chief economist at Insight Economics, said the overall picture for construction was brighter. But he said the industry has a long way back to full health.

"Construction spending appears to be slowly climbing, emphasis on slowly, out of a very deep hole," he said.

Residential construction rose 3 percent to an annual rate of $261.3 billion. Spending on nonresidential projects rose 0.4 percent in May to an annual rate of $299.1 billion, the third straight monthly gain. In May, spending on shopping centers, hotels and office buildings all saw gains.

Government construction projects fell 0.4 percent to an annual rate of $269.6 billion. Spending at the state and local level fell 1 percent to $242.6 billion at an annual rate.-- AP