Construction Spending Rose Unexpectedly in June

Washington, DC, Aug. 2, 2010--Construction spending in the U.S. unexpectedly rose in June, thanks largely to government programs, according to the Commerce Department.

The 0.1% increase in spending followed a revised 1% drop in May that was larger than previously estimated. Spending by federal agencies rose to a record.

Homebuilding and sales are falling after the expiration of a government tax credit that boosted builder sentiment and brought starts to the highest level in more than a year in April. Future demand will depend on the state of the labor market and foreclosures.

Economists forecast construction spending would decline 0.5%.

Construction spending decreased 7.9% in the 12 months ended in June.

Private construction spending dropped 0.6% following a 1.4% decrease in May. Homebuilding outlays fell 0.8%. Private non-residential projects decreased 0.5%, reflecting declines in construction of factories, commercial dwellings and communications stations.

Spending on public construction increased 1.5% from the prior month, led by power, sewage and waste disposal and conservation plants. Federal building climbed 4.6% to $31.7 billion, the most on record.

Spending on single-family residential structures dropped 0.7% in June, the first decline in a year.