Construction spending in May was lifted by a 1.8 percent rise in public construction projects, the biggest rise in nearly a year, after two straight months of declines. Public construction spending in May touched its highest level since November last year.

Construction spending increased 0.5 percent to an annual rate of $874.9 billion, the Commerce Department said in a July 1 report. April gains were revised downward to just 0.1 percent, less than the 0.4 percent initially reported last month.

Despite the tepid growth, the construction spending rate is 5.4 percent higher year-over-year, and real construction spending, reported at $326.2 billion, is 6.2 percent higher than the $307 billion reported in May 2012.

The value of private residential construction in May reached an annual rate of $322.3 billion (seasonally adjusted), the highest level since October 2008. Private home-construction spending in May was up 1.2 percent from April, the fastest monthly gain since January, and up 23.1 percent from the same period in the prior year.

Spending growth on nonresidential structures contracted in the first quarter for the first time in two years, while federal government project outlays rose 0.6 percent, increasing for the second consecutive month. State and local spending, which is accounts for more spending than federal projects, jumped 1.9 percent to a six-month high.