Updated

Outlays for U.S. construction rose for a fourth straight month in May, as spending on housing more than offset weakness in commercial and governmental building, a Commerce Department (search) report showed on Thursday.

The Commerce Department said construction spending climbed by 0.3 percent in May to a seasonally adjusted $988.53 billion annual rate, a smaller-than-expected gain, after a downwardly revised 1.2 percent jump in April outlays. May's expenditure rate was a record.

However, analysts had been expecting construction spending to post a larger 0.7 percent gain in May.

While spending on private sector residential construction rose by 0.8 percent, outlays for other types of commercial construction fell by 0.4 percent. Drops were seen in outlays for hotels, office buildings, schools, and communication facilities.

Spending by state and federal governments on new construction dipped for the second time in four months, falling 0.2 percent in May. Spending on public housing advanced by 5.0 percent, but that was offset by decreases in spending on other types of government buildings, including schools, power facilities, and hospitals.

Rising interest rates have spurred a recent spike in residential construction as prospective buyers jumped into the market to avoid paying more for home loans. New home sales rose to a record pace in May, according to the Commerce Department.

In its most recent "beige book (search)" report, an anecdotal look at economic conditions nationally, the Federal Reserve (search) said, "Residential real estate markets remained strong, and a few districts noted stable or improving conditions in commercial real estate markets" in April and May.