Dec 3 (Reuters) - U.S. construction spending rose in October by the most in five months, with stronger spending on homes outpacing tepid gains in business and government projects.
Construction spending climbed 1.4 percent to an annual rate of $872.1 billion, the highest level in over three years, the Commerce Department said on Monday. Analysts polled by Reuters had expected a 0.5 percent gain.
The department also said superstorm Sandy, which hit the East Coast at the end of October, likely had a minimal effect on the data.
Home building is expected to add to economic growth this year for the first time since 2005, although the housing sector remains a shadow of what it was before the 2007-09 recession.
Spending on private residential projects rose 3 percent in October, a reflection of this year's improving housing market.
Muting the gain in overall construction, however, private spending on nonresidential projects edged up just 0.3 percent.
Businesses have shown signs they are holding back on investments because federal austerity plans could trigger a recession next year, and the construction data could be another sign offlagging confidence.
Public sector construction spending rose 0.8 percent. State and local spending dropped 0.1 percent, while outlays on federal government projects increased 10.7 percent. (Reporting by Jason Lange; Editing by Neil Stempleman)