U.S. construction spending gain smallest in five months

WASHINGTON, (Reuters) - U.S. construction spending barely rose in June as private outlays posted their biggest drop in a year, but the underlying trend suggested the economy remained on solid ground.

Construction spending increased 0.1 percent, the smallest rise since January, the Commerce Department said on Monday.

May's outlays were revised sharply higher to show a 1.8 percent gain instead of the previously reported 0.8 percent rise. Economists polled by Reuters had forecast construction spending rising 0.6 percent in June. Construction spending was up 12 percent compared to June of last year.

In June, construction spending was restrained by a 0.5 percent drop in private construction spending, the largest decrease since June 2014. Spending on private non-residential construction projects fell 1.3 percent, the biggest drop since January 2013. Spending on nonresidential structures has been undermined by investment cutbacks in the energy sector in response to the tumble in crude oil prices.

Outlays on private residential construction, however, rose 0.4 percent to their highest level since May 2008, reflecting gains in home building and a bump up in renovations.

Public construction outlays jumped advanced 1.6 percent to their highest level since November 2010.

Spending on state and local government projects - the largest portion of the public sector segment - surged 2.2 percent to the highest level since September 2010. Federal government outlays dropped 4.7 percent, the biggest fall since January.

(Reporting by Lucia Mutikani; Editing by Paul Simao)