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U.S. construction spending climbs on home, commercial building outlays

New townhouses under construction are seen in Fairfax, Virginia, just outside of the capital Washington, September 1, 2013. REUTERS/Larry Do
New townhouses under construction are seen in Fairfax, Virginia, just outside of the capital Washington, September 1, 2013. REUTERS/Larry Do

WASHINGTON (Reuters) - U.S. construction spending rose in July as more outlays to build homes and businesses countered a decline in the government sector.

Construction spending climbed 0.6 percent to an annual rate of $901 billion, the Commerce Department said on Tuesday. The growth rate was above the median forecast in a Reuters poll of analysts.

The biggest gain in spending came from the business sector as firms increased outlays on projects for offices, commercial buildings and factories.

Private spending on home construction projects also advanced, a sign builders were still betting on a housing market recovery despite a sharp increase in mortgage rates since May.

Borrowing costs have been on the rise due to expectations the U.S. Federal Reserve will reduce its bond-buying stimulus program.

Holding back the construction industry in July, however, was a drop in spending by state and local governments. Federal construction spending, a small fraction of total public sector construction outlays, increased during the month.

Overall, public sector spending fell 0.4 percent. State and local governments are feeling the pinch this year from federal budget cuts, which affect the level of transfers to local administrations.

(Reporting by Jason Lange; Editing by Andrea Ricci)

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