BC-USA-ECONOMY/CONSTRUCTION (UPDATE 1)

UPDATE 1-U.S. construction spending surges in April

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WASHINGTON (Reuters) - U.S. construction spending rose unexpectedly in April, recording its largest monthly increase in nearly 10 years, according to a government report Tuesday.

The Commerce Department said construction spending rose 2.7 percent, the biggest advance since August 2000, to an annual rate of $869.1 billion. March's increase was revised up to 0.4 percent from a 0.2 percent gain.

Economists surveyed by Reuters forecast that construction spending would be unchanged in April.

Investment in private construction surged 2.9 percent, the largest increase since July 2004, to $565.8 billion after declining 0.5 percent in March.

It was the first time since October that spending on private construction increased. Spending was lifted by a 4.4 percent rise in private home building, which was the biggest gain in six months.

Home construction activity picked up in recent months in response to a popular tax credit, which required prospective home owners to sign contracts by April 30 and close them by June 30. A lull is expected in the months ahead.

Private nonresidential spending rose 1.7 percent in April, the largest increase since September 2008, after falling 0.9 percent the prior month.

Public construction spending increased 2.4 percent in April, the biggest gain in 14 months, building on the prior month's 2.0 percent increase.

State and local government investment in construction projects increased 2.3 percent in April, the largest increase in just over a year, after rising 2.1 percent the previous month.

Federal construction advanced 2.9 percent following a 0.4 percent gain in March. Federal spending on construction projects has now increased for four months. (Reporting by Lucia Mutikani; Editing by Andrea Ricci)

REUTERS