WASHINGTON (AP) — Spending on U.S. construction projects likely posted a modest gain in June.

Economists forecast that construction spending rose 0.3 percent in June compared with May, according to a survey by FactSet. The Commerce Department will release the report at 10 a.m. EDT Thursday.

In May, construction spending rose a solid 0.5 percent, the best showing since February. The gain was propelled in part by a solid increase in spending on housing construction.

Construction activity has been volatile in recent months with big gains in February and May and declines in January and March.

Construction spending on government projects, both at the federal level and the state and local levels, has struggled over the past year, reflecting in part the budget constraints being faced at all levels of government.

Housing, however, has been a standout performer in an economy that has been hit this year by federal tax increases and across-the-board spending cuts.

The government reported Wednesday that the overall economy, as measured by the gross domestic product, grew at an annual rate of 1.7 percent in the April-June quarter, marking the third straight quarter of lackluster growth. The economy barely edged ahead at an annual rate of 0.1 percent in the last three months of 2012 and then grew by just 1.1 percent in the January-March quarter.

Economists hold out hope that economic growth will rebound to a more respectable rate of around 2.5 percent in the second half of this year as the effects of the January tax increases and the government's spending cuts begin to lessen.

For the spring quarter, the government said that residential construction grew at an annual rate of 13.4 percent, the fourth straight quarter of a double-digit gain in this category.

Builders are responding to rising demand which has pushed home prices up. The Standard & Poor's/Case-Shiller 20-city home price index released this week showed a price jump of 12.2 percent in May compared with a year ago, the biggest annual gain since March 2006.

 

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