WASHINGTON, May 2 (Reuters) - - U.S. construction spending rose to an 8-1/2-year high in March and the prior month's outlays were revised higher, pointing to sustained strength in the sector despite a sharp downturn in spending by energy firms.
Construction spending increased 0.3 percent to the highest level since October 2007, following an upwardly revised 1.0 percent jump in February, the Commerce Department said on Monday.
Economists polled by Reuters had forecast construction spending rising 0.5 percent in March after a previously reported 0.5 percent decline in February.
Construction outlays were up 8.0 percent from a year ago.
Though February's outlays were revised higher, construction spending for January was revised down to show a 0.3 percent drop instead of the previously reported 2.1 percent increase.
A drop in nonresidential construction investment helped to hold down economic growth to a meager 0.5 percent annualized rate in the first quarter. Much of the weakness in spending on nonresidential structures reflected relentless aggressive spending cuts in the energy sector, which is reeling from last year's plunge in oil prices.
In March, construction spending was supported by a 1.1 percent surge in private construction, which hit its highest level since October 2007. Outlays on private residential construction increased 1.6 percent. Spending on private nonresidential structures, which also includes factories and offices, advanced 0.7 percent to the highest level since October 2008.
Public construction outlays fell 1.9 percent in March as outlays on state and local government construction projects, the largest portion of the public sector segment, declined 1.4 percent. Federal government construction spending tumbled 7.4 percent in March.