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CONSTRUCTION SPENDING UP .9% AFTER STEEPEST DROP SINCE '91

Construction spending rose 0.9 percent in June, rebounding from the biggest drop in four years a month earlier.

The Commerce Department said spending on residential, nonresidential and government projects totaled $520.4 billion at a seasonally adjusted annual rate, up from a revised $515.8 billion a month earlier.The 1.5 percent drop in May had been the steepest since a similar 1.5 percent decline in May 1991.

Nonresidential and public spending increased in June, but overall spending was held back by the sixth straight decline in residential outlays.

Residential spending, nearly half of overall construction outlays, fell 0.8 percent in June to $230.2 billion.

Residential construction has been curbed this year by high mortgage rates that scared away buyers, resulting in an inventory buildup.

But rates have been falling steadily since the first of the year and builders have returned to laying foundations.

Thirty-year, fixed-rate mortgages, which averaged 9 percent when the year began, had dropped to 7.53 percent in June.

The monthly payment on a $100,000 mortgage with a 7.5 percent interest rate is $699, while the payment on the same loan with a 9 percent rate is $805 - a difference of $106.

Still, construction of single-family homes, which are particularly sensitive to interest-rate swings, slipped another 1.4 percent in June to $135.8 billion. It also was the sixth consecutive drop.

Multifamily housing spending also fell, down 0.5 percent to $18.5 billion after advancing 1.6 percent a month earlier.

Nonresidential outlays rose 3.5 percent to $110.1 billion, wiping out a 2.7 percent decline the previous month. Spending on hotels and motels was up 13 percent, while spending on other commercial projects such as shopping centers rose 10.2 percent.

Government spending increased 1.1 percent to $140.6 billion after slipping 0.8 percent in May. Construction of highways and streets was up 4.6 percent and spending on sewer systems rose 2.5 percent.